Oil, boil, toil and trouble, we're going to print more money. Count Bernanke is out to suck more blood out us poor turnips as the Fed looks like QE2 might be a whopper after all! Hey wait a minute! What? Is it possible that the Fed and the upcoming Mid-Term elections are not scaring the oil bear anymore? Well at least for a day the oil market seemed more spooked about mounting supply and decreasing demand then any spell that the Fed was going to cast upon the economy.
Despite weakness in the dollar and the most impressive gold rush in weeks, oil struggled to close higher on the day. Perhaps the market is still coming to grips with the horror of this week's big build in U.S. supply which, according to the Energy Information Agency, is the highest level ever ending the month of October sitting at 366.2 million barrels. Now that's scary!
Not only that, the supply numbers are daunting with concern that demand from Asia is weakening. Dow Jones news wires reported that India's crude oil imports fell 21.9% to 10.94 million tons in September, or 2.67 million barrels a day, from 14.01 million tons a year earlier. Crude imports were up 14% from 9.57 million tons in August. But there is still some concern about Indian demand. India imports about three quarters of its crude oil for its demand needs. We know that the global oil market feeds off of China and India feeds off of China and in China this week they took more steps to slow energy demand.
After increasing interest rates, the Chinese attacked oil demand directly by increasing the cost of diesel and gasoline by 3%. Now we do not know whether or not a 3% increase will significantly slow demand but it might. Now take into account rising OPEC production and a glut of spare production capacity around the globe and it is no wonder why the oil upward momentum has been limited.
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 firstname.lastname@example.org.