United They Stand
United they stand, divided we fall, and Greece's problems has Europe's back to the wall as divisions, divisions bring us down. So much for the euphoric rally on the hope and promise of a deal to meet Greece's debt obligations as divisions in the Eurozone are stealing some of that incredible market momentum. This Greek tragedy continues to be a major driving force behind the value of oil and every stock and commodity around the globe.
The most obvious and direct impact on the price of oil is reflected in the value of the dollar. The day before yesterday when the market feared that a Greek default may lead to the end of the Eurozone, the dollar became the safe haven of last resort. The market feared that a breakup of the zone and a Greek default could create the same type of contagion mood the globe felt after the Lehman failure. We see the market was predicting that an unmanaged Greek default would put the world into a deflationary downdraft. If Greece falls, then what about Italy? Would they be next? How about Spain or Ireland? The market feared a freezing of the global economy and banking system as banks would refuse to deal with each other as they tried to determine their exposure to the Greek ruins.
Yet when the EU promised a deal that Europe would stand idly by while the world economy fell apart was well. Stocks and commodities soared across the board and the market now believes that there is no way that Europe would stand by while the global economic system fell apart.
In fact even a Financial Times report that said that a split over the terms of Greece's second €109 billion bail-out developed wasn't enough to shake the confidence in the market that the EU would stand idly by while Rome or Athens burned. The FT said that" as many as seven of the bloc's 17 members arguing for private creditors to swallow a bigger write-down on their Greek bond holdings, according to senior European officials. The divisions have emerged amid mounting concerns that Athens' funding needs are much bigger than estimated just two months ago. They threaten to unpick a painfully negotiated deal reached with private sector bond holders in July."
Still it did slow the buying as traders wait to see just what kind of deal would be done. We are still waiting.
We may have topped, but of course beware of a quick pop on positive bailout news. The API reported that crude oil increased by 568,000 barrels! Of Course the EIA should show a much larger increase as it catches up with the API. The API also showed a massive 4.63million barrel build in gasoline supply. Is anybody driving anymore?
We still feel the low for WTI oil is in for the year but we were nervous!!
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 email@example.com.