The Oil Indicator
On a day when global markets imploded because of the weight of all the problems in the world, is it possible that the fact that the November Crude oil closed above $80 a barrel a sign that the global rout may be nearing an end? After getting battered and beaten, the global markets are trying to come back. While still woozy, where oil closes to end the week may be a sign of hope or perhaps doom to the rest of markets around the globe.
You see in times of fear and asset loathing, oil acts a pure play because no matter how bad things might feel, there will be some degree of demand. Oil prices that have been pumped up by quantitative easing and now selling off on demand destruction fears will try to find equilibrium in the market turmoil today. We are already seeing signs that the break in price is inspiring some better demand now that the froth has worn off.
Dow Jones Newswires says that "sentiment in the Asian crude-oil market will likely stay bullish, with spot premiums supported by firm product cracks as trading in November cargoes of Middle East supplies begins to wind down. Most refiners in Asia intend to ramp up production to meet winter heating demand in the fourth quarter. A sharp fall in crude prices boosted product cracks over the past week, especially for fuel oil, which may increase demand for Middle East medium and heavy sour grades. As a result, premiums of the few unsold November cargoes of medium and heavy Middle East crudes are expected to rise or at least hold steady, while demand for lighter grades may fall due to marginally weaker naphtha cracks. "
Yet if the stock market cracks then watch out. My take is that if oil closes above $80 today we will have a short-term bottom on stocks! If not get ready for Black Monday!
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.