Oil whipsawed by Europe and demand

Quick Change

Wild moves in oil driven by constantly changing fundamentals that seem to change hour by hour. Oil prices continue to get whipsawed as the global macro economic outlook changes faster than a quick change artist in a hurry! Yesterday and even into this morning the outlook for oil was influenced by Italy, Greece, Europe, The International Monetary Fund, the Federal Reserve, OPEC, China, The Energy Information Agency, the International Energy Agency and by technical factors. In the Morning it was being much larger then Greece’s would because major ramifications for the Euro zone and the oil demand outlook for the world at large as the contagion threatened to spread. Yet some happy talk from the International Monetary Fund and promises by Italy to get its spending under controlled seem to be the panacea that market confidence just needed for a moment.

Oil and stock markets started to rebound when as reported by the Wall Street Journal “Italy's economy minister Wednesday said the country's four-year fiscal plan will be made more stringent." The budget bill will be bolstered for each individual year," Giulio Tremonti said in an address to bankers in Rome. He also vowed that the bill will be passed by parliament by Friday. Italy's plan to balance its budget by 2014 shifted most of the spending cuts to 2013 and 2014, prompting criticism that the government lacked credibility.” So Friday will be another day to watch Italy for the next market scare.

It also helped that new IMF chief Christine Lagarde said that the IMF would be there to help out Greece. Reuters’ reported that “The International Monetary Fund on Tuesday welcomed Europe's decision that Greece's debt problems require a broader response and said it would cooperate in trying to help."The IMF welcomes the Eurogroup reaffirming their commitment to safeguard stability in the euro area," IMF Managing Director Christine Lagarde said in a statement. "We also welcome the ... recognition of the need for a broader, more forward-looking policy response to assist Greece in its efforts to restore growth and competitiveness, and to bolster debt sustainability," she added

These soothing words helped turn things around helping to cool the dollar down and bring the Euro Currency back from the brink of a major breakdown. Once again all was well in the Eurozone and the PIIGS were fast asleep’ yet late in the day another PIIG problem regurgitated. Moody’s downgraded Ireland once again raising fears that the market might fall part. Once again it looked like a rush to the exits and oil demand expectations once again went hurdling towards the earth.

On top of that you had demand expectations being ratchet back by OPEC and the Energy Information Agency and by the International Energy Agency who also questioned China demand. First it was OPEC who according to RTT News “slightly lowers world oil demand growth as the unsteady global economy has added risks to the forecast. In its monthly Oil Market Report OPEC lowered its world oil demand growth forecast to 1.36 million barrels per day, marginally down from its earlier prediction of 1.40 million barrel per day. Global oil demand is expected to grow at a slightly lower 1.32 million barrels a day in 2012.

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