A Bank Bounce and Hot Money
A rebound in bank stocks in Europe is giving oil a reason to rally. With the dark clouds surrounding Europe and the lack of a debt deal, not to mention the ominous threat of QE 3D, will keep oil prices supported today. Yesterday turmoil in Europe drove prices lower as safety was job number one. Traders ran to gold and silver as they worried about the potential destruction of demand and the destruction of paper assets as traders fretted about the uncertainty surrounding another Greek bailout. Gold hit another nominal record high rising in prices for the 10th consecutive session in a row. (Buy them when they are creeping and sell them when they are leaping seems o be the rule of the moment). Yet the mood has shifted as the desire for yield and the shifting of hot money away from the United States and Europe back into the emerging markets that more than likely will spend that influx of cash on a whole bunch of commodities. A little stability Europe for the moment is bringing a bit of the risk appetite back.
Oil is bouncing back and even copper too as it is clear that with the problems continue to unfold in Europe and the United States will increase the odds not only of a QE 3D but also more stimulus to bail out the PIIGS. The growing risk of default in the Eurozone may have obvious demand destruction issues but money may want to get out of debt paper and buy something that is going to have value even if the global economic system grinds to a halt. Remember demand is passé when the printing presses begin to run.
The hot weather played a factor in yesterday’s trade as well. Natural gas futures tried to shrug off the sweltering temperatures but could not. Cattle sold off as weights are falling and farmers are rushing cattle to the market. Yet concerns of nuclear tainted beef because of infected feed from the Japan nuclear disaster hangs on the market.
Watch Brent crude as news that the rebels in Libya may be back in the oil business. Dow Jones reports, “The oil tanker, Captain X Kyriakou, docked in the rebel-held Libyan port of Benghazi Monday seeking to load crude oil; shipbrokers told Dow Jones Newswires Tuesday. The Suezmax vessel is owned by Athenian Sea Carriers. Its final destination is currently unknown, with its status according to AIS tracking live data at "awaiting orders."
Sheik Hugo! Bloomberg News reports that, “Venezuela holds the world’s largest crude reserves, following a 40% revision to estimates of the country’s deposits, according to OPEC. The Latin American nation had 296.5 billion barrels of crude at the end of 2010, the Organization of Petroleum Exporting Countries (Opec) said in its Annual Statistical Bulletin, published on its website. That compares with 264.5 billion in Saudi Arabia, little changed from 2009, when its reserves were the world’s largest. El Mundo newspaper reported on June 16 that Venezuela Oil Minister Rafael Ramirez said OPEC was including so-called synthetic crude from the country’s Orinoco Belt within its estimates of Venezuelan production. Iraq’s crude reserves were estimated by OPEC at 143 billion barrels in 2010, 24% higher than the previous year. The 12-nation organization accounts for about 40% of global oil supplies.” This is a legitimate source of reserve. While it is more expensive to extract it is there and possible. Take that peak oil worry-warts!