Speculating on other reasons for oil bull

Meanwhile the price of commodities are being held hostage on the whims of the Fed. QE2 is one of the most bullish things to ever happen to oil and it may be coming to and end. Even Jean Claude Trichet seems to be getting it by saying that he shares the view that a strong dollar is in the best interest of the United States. While Mr. Trichet says that, “At the moment I do not see any significant materializing of second-round effects and I do not see un-anchoring of inflation expectations," Mr. Trichet told the Helsinki Sanomat and Kauppalehti newspaper. In other words he doesn’t see food and energy driving inflation expectations yet at the same time the comments about the dollar seem to suggest that he is concerned about how the imbalance between the euro and the dollar are driving up commodity prices.

In China governmental control of commodities is starting to get too difficult to handle. Last week Chinese oil giant Sinopec stopped exporting oil products to maintain domestic supplies amid disruption concerns caused by Middle East unrest and Japan's earthquake. This week Dow Jones says that China will limit alcohol and bio-fuel projects that use grain and edible oils as raw materials in an effort to secure grain supply. The government will also limit corn starch projects with corn processing capacity of less than 300,000 metric tons a year and soybean crushing projects outside major producing areas, the National Development & Reform Commission said in industrial guidelines published on its website.

In the meantime slaughter in Syria by the government against protestors is raising risks in the region. Syria could spread its terror throughout the region. The war goes on in Libya. Yemen leaders come to an agreement but the violence continues. CNN reports that, “Iran threatened a tit-for-tat response Tuesday after Bahrain declared an Iranian embassy official in Manama persona non grata and gave him 72 hours to leave the country. On Monday Bahrain ordered Hujatullah Rahmani, the second secretary in the Iranian embassy, to leave because of his alleged links to a Kuwaiti spy ring, the Bahrain News Agency said. Bahrain also said Iran should stop its, "irresponsible behavior" and not interfere in the country's internal affairs, the news agency said. Iran’s Foreign Ministry spokesman Ramin Mehmanparast responded Tuesday, saying Bahrain's actions are "not based on realities." The spokesman said Iran reserved the right to take retaliatory measures against Bahrain, Iran's state-run Press TV said. Relations between the two countries have been tense in recent months as Bahrain contends with an anti-government movement that it said is being fueled by Tehran.

These risks are risks to oil as well!

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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