Oil climbing on strong demand and weak dollar

“Either you decide to stay in the shallow end of the pool or you go out in the ocean.”

Christopher Reeve

EMI QuickView Short Term Market Overview

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The U.S. dollar is down, equities are up and oil and other commodity prices are higher. The macro relationship between the financials and commodities continue to prevail this morning after a day where the opposite occurred on Tuesday. Further supporting oil prices this morning was an increase in projected global oil demand by the International Energy Agency (IEA) in their just released monthly oil assessment (see below for more details) as well as a report that China’s crude oil imports hit a record last month. China’s crude oil imports surged to 23.3 million metric tons in September suggesting strong demand for energy to support what continues to be the strongest strongly growing economy in the world.

On the equity front, global equities have all gained ground over the last twenty-four hours as shown in the EMI Global Equity Index table below. The Index is now higher by 0.5% so far this week resulting in the year to date gain for the Index rising to 2.8% or back to early April levels. China remains the most interesting storyline in the equity markets as the Shanghai A shares continue to surge higher adding another almost 1% to its value today. The Chinese equity market has recovered strongly after spending months in bear market territory (year to date loss over 20%). The Index is now down by just 12.8% on the year and looking like it may be poised to surpass Japan as it crawls its way out of the bottom of the indices list. With the Chinese economy continuing to grow…even as the government works to throttle back bubbles in housing and elsewhere… it will likely be the growth catalyst that most market participants focus on in the coming months. The highly correlated equity market (correlated to oil prices) continues to be a very positive catalyst for higher oil prices, especially with the highly correlated U.S. dollar continuing to weaken further as most investor/trades are pretty much convinced the U.S. Fed will embark on a new round of quantitative easing sooner than later.

EMI Global Equity Index

10/13/10

Change

Change

2010 YTD

2010

From

From

Change

7:32 AM

Yesterday

Yesterday %

%

US/Dow Jones

11,020

10

0.09%

5.7%

Can/S&P-TSX

12,576

40

0.32%

7.1%

Lon/FTSE

5,733

72

1.27%

5.9%

Paris/Cac 40

3,809

58

1.55%

-3.2%

Germany/Dax

6,398

94

1.49%

7.4%

Japan/Nikkei

9,403

15

0.16%

-10.8%

HongKong/HangSeng

23,458

336

1.45%

7.2%

Aussie/SYDI

4,619

2

0.04%

-5.4%

China/Shanghai A

2,998

21

0.71%

-12.8%

Brazil/Bvspa

70,946

138

0.19%

3.4%

EMI Global Equity Index

15,096

79

0.52%

2.8%

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