Oil stocks and fears of deflation both up

It's a Barrel Buster!

Oil rose after a barrel busting report. US total petroleum supplies hit the highest level in 29 years. Crude stocks are the highest since 1980. Gasoline supplies, the highest levels since 1990. The forward demand covers for supply, the highest since 1995. Demand for petroleum products dropped a whopping 6.4% and prices rise! So I guess this quantitative easing thing is a way to help oil companies and their bottom line.

The Fed wants inflation and the Fed gets what it wants and is even thinking about going beyond their informal target rate. The Fed fear deflation and believe that the best weapon against it is inflation real or not. The Wall Street Journal says that says, "the rationale is that getting inflation up even temporarily would push "real" interest rates-nominal rates minus inflation-down, encouraging consumers and businesses to save less and to spend or invest more" Let's see how that works for you.

At the same time, the US and China are getting testy about the currency rate as the Chinese are saying that forcing them to revalue or devalue their currency would lead to a disaster for the world. The set up is so bullish and commodities continue to soar! So that can only mean one thing! Get ready for a big commodity correction! Ok, I am only partly kidding but with all this bullish news and the dynamic run, the bulls, fat with major profits, could be getting ready to take them. The culmination may be tomorrows big employment report as it will confirm or deny all of our deepest fears about the economy. If the jobs number is bad, well heck we already suspected that because the Fed has been telling us that the economy needs more help because the jobs market is anemic.

So buy the rumor and sell the fact and take those profits. Remember this is a profit taking business. On the other hand if the jobs report surprises to the upside then maybe, just maybe this quantitative easing thing isn't a sure thing after all. Natural Gas inventory today!

Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at pflynn@pfgbest.com.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.


Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.

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