Oil soaring on hopes of EU debt agreement

If at First...

If at first you don't succeed, then schedule another meeting. The EU rallied global commodity markets as it seems they are going to try again and again to come up with a solution to allow an orderly Greek default and a plan to bail out European banks. So much for the Sunday deadline for the comprehensive EU plan, but at least if they keep talking the market believes that the odds are higher of an agreement on a plan to save the Eurozone from itself.

While the Greek default does not seem to be an issue, fears that a disagreement on how to monetize the European Financial Stability Facility (EFSF) threatened to derail the entire deal and cause a meltdown of the European banks and a deflationary collapse across the globe. The French are very concerned that the plan to just print more euro's endorsed by Germany and the EU would only be a short-term bandage on the wound and might lead to another economic crisis down the road. Instead France wants to make the EFSF a bank that is accountable. A bank that has to put its assets up as collateral to borrow more money from the European Central Bank. A bank that could issue bonds, but also must create a plan to be profitable and self-sustaining. The disagreement led to fears by traders that the plan would fall apart. Yet a joint statement by France and Germany said that they will hold a second summit had traders believing rightly or wrongly that the chances for a deal are rising.

Too many changes as the latest big North Sea discovery will take pressure off of the Bent crude market in the coming years. A major find in the North Sea just keeps getting bigger and bigger! Dow Jones reports, "Norway's oil and gas major Statoil ASA (STO) Friday said its giant North Sea discovery Aldous Major South is estimated to contain double the volume compared with previous estimates, sending the shares of Statoil and its partners higher. Statoil, partly state-owned and the largest player on the Norwegian continental shelf, said the find is estimated to contain between 900 million and 1.5 billion barrels of recoverable oil equivalent. This compares with its previous statement that the find would contain between 400 million and 800 million barrels." So much for the Brent forever leading the WTI.

The stakes are obviously high and the final details of the plan may determine just how bullish or bearish oil prices are. Oh sure, the death of former Libyan leader Moammar Gaddafi is historic but it was priced in already to a certain extent. We learned how important Libyan oil was in filling the void of declining North Sea production.

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 pflynn@pfgbest.com.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

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