Besides as I also said before, we already kind of had a dry run for this crisis if you look back to the beginning of the global financial crisis. Back then the world thought that this "little" subprime crisis was only a US problem. That the rest of the world had “decoupled” from the US, and while their banks might fail the rest of the world was sufficiently protected from any US fallout. In fact Jean Claude Trichet was so convinced that this crisis was a US problem he raised rate in Europe while the US was lowering them. This caused a mad rush out of US holdings and caused a massive sell off in the dollar and a surge into commodities setting the stage for a run in oil to an all-time record high. We saw what commodities do as Fed action and an aversion to the dollar so you can be prepared if indeed the “unthinkable happens.” A downgrade to the US debt rating would have less of an impact then a default but would cause havoc nonetheless.
Yet some of the bullish shorter momentum in oil may be slowed due to a larger than expected increase in crude supply according to the American Petroleum Institute. The API reported a huge rebound in crude oil supply to the tune of 4 million barrels. Gas stocks also surprisingly fell by 639,000 barrels. And we saw another big build in distillate stocks increasing by a hefty 2.9 million barrels. The main reason for the build was a big rebound in crude imports that hit 452,000 barrel per day. Refinery runs also slowed causing increase of 317.000 barrels in the Cushing, Oklahoma delivery point. This could be a sign that we hit the refining peak and we will see demand and runs start to fall off.
Brazil is getting desperate to slow gasoline demand as the booming Brazilian economy is putting stress on Brazilian refining capacity. Brazil’s consumer confidence hit an all time high and they are guzzling gas and ethanol like it is going out of style. Petrobras, the state run oil company, is warning that prices will have to rise.
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.