Terror premium is a cost of doing business. What was striking in the Friday reports about the attempted mail bomb terror attack was the market's indifference. The market has already priced in a certain amount of terror possibilities and, in a way, we are paying for it every day. We are paying for it in the cost of insurance and freight and we are paying for it in terms of even higher commodity prices. It's sad that we have come to expect this type of evil in the world.
Today oil is getting a boost out of strong data from China and India. The Chinese official purchasing managers’ index rose to a six-month high in October to 54.7 from 53.8 in September. The market was only looking for a 52.9 reading. The strong number brought back the risk appetite and rallied oil and broke the dollar. The HSBC version came in at only 54.8 but did have one of the biggest month to month increases in history. With readings like these it is no wonder that China is trying to slow its economy down.
The main driver for the market this week will be the Fed. Now everyone knows that the Fed, the size of its massive QE2 program and how it is implemented will be the main factor in the pricing of oil and all other commodities. People are finally getting the fact that it has been the Fed and the different phases of this economic crisis that has driven the cost of oil, NOT SPECULATORS!
U.S. product exports should be strong again in this week's reports. Oil Inventories are still at the highest level since the 1930s! Look for crude to be down 2.0 million barrels, gas down 2.0 million, distillates down 2.5 and runs up 0.5.
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.