It appears that reports of a rebel victory in Libya might have been overly optimistic. Apparently there is still heavy fighting going on in Tripoli. Forces loyal to Moammar Gaddafi are getting ready for at least one more stand and according to the New York Times, Gaddafi's son, Seif al-Islam, made a surprise appearance at a hotel with foreign journalists and was taunting the rebels. Reports of fighting and the possibility of an urban war have perhaps dashed the hopes of a quick resolution to this crisis. Yet the rebels are already making plans to restart the energy industry and counties like Russia, China and Brazil that failed to support the rebels may be cut out of oil deals with the rebels.
Oil bulls are not only getting support from the uncertainty in Libya but also from much better than expected data out of China. Maybe the Chinese economy is slowing as quickly as some had feared. The HSBC preliminary purchasing managers index for China’s manufacturing sector increased to a better than expected 49.8 in August from 49.3 in July. The news overshadowed PMI readings for the Eurozone that came in softer than expected 51.1% reading.
The weakness in the Eurozone and renewed vigor in the commodity complex is going to raise pressure on Jean Claude Trichet to lower rates as Europe and its debt crisis could impact the world. This comes at a time when speculation that US Federal Reserve Chairman Ben Bernanke might be getting ready to run the printing presses with a dose of QE3D and that could create another bull surge in commodities if the Europeans remain stubborn.
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.