Oil uncertainty shifts to US super committee

The Blame Game

Kerry, berry! Bo Berry, Bonana fanna fo Ferry. KERRY! Come on everybody! I say now let's play a game. I betcha I can put the blame on some else's name.

Super committee has broken down in the blame game as the great partisan divide continues on how to cut $1.2 trillion in spending. The Democrats believe that the only way to fix the deficit is to allow the Bush tax cuts to expire, thereby putting through the highest tax increase in history during a time when the economy is struggling. The Republicans refuse any type of tax increase except for the possibility to rein in spending and closing tax loopholes. The bottom line is that the Republicans believe that the deficit is a spending problem and not that the people are being taxed too little. The ongoing uncertainty is weighing on stocks as well as the price of oil.

Yet that is not the only reason that oil is faltering. The market is still focused on Europe and that situation seems to get more dangerous every day. The Wall Street Journal writes, "Spain's conservative opposition won a sweeping electoral victory on Sunday, in the latest sign that Europe's financial crisis is remaking the political map. Spain became the third ailing Eurozone economy to see a change of government in recent weeks, as the Popular Party won a strong mandate to overhaul one of the currency bloc's largest ailing economies, after administrations in Italy and Greece collapsed over their inability to push through economic overhauls demanded by the European Union and financial markets. This political turmoil has triggered a dangerous new phase of the region's sovereign-debt crisis, sending borrowing costs soaring even higher..."

Oil also is going to focus on increased violence in Egypt as they border the sensitive oil throughway, the Suez Cannel. Inventories will be released on Wednesday for petroleum but will be released Friday for natural gas. We are looking for U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) to fall by 2.1 million barrels and gasoline inventories to rise by 1.5 million barrels and distillates to fall by 2.2 million barrels runs will be up 0.5.

Bloomberg News reports Premier Wen Jiabao pledged to U.S. President Barack Obama that China will increase the flexibility of fluctuations in its currency, the official China Central Television reported. China will push forward yuan reform in an active, gradual and controllable manner, the television station cited Wen as telling Obama yesterday in Bali, Indonesia. China is closely monitoring changes in the yuan's exchange rate, the report said.

Policy makers in the world's second-largest economy have pledged to adjust the nation's growth toward domestic demand and narrow its external surplus to help address lopsided flows of trade and investment that contributed to the global financial crisis of 2008. Unbalanced trade flows have triggered calls from the U.S. and other Group of 20 nations for China to allow its currency to trade more flexibly.

Chinese President Hu Jintao told Obama at a Nov. 12 meeting that a large appreciation won't solve U.S. problems. During a trip that began Nov. 11 in Hawaii, Obama announced steps to expand trade and military cooperation with Asia-Pacific nations that share U.S. concerns over China's currency and intellectual property policies and territorial claims.

The yuan is allowed to fluctuate 0.5 percent on either side of the daily fixing rate set by the central bank. China's yuan has appreciated 4.13% against the dollar this year, according to Bloomberg data, the best performance of 10 Asian currencies tracked by Bloomberg.

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.


Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.

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