Oil prices struggle after European summit

Europe Might Get Downgraded for Christmas!

Europe might get downgraded for Christmas. The rating agencies seem mad! Europe might get downgraded for Christmas because Europe's big plan seems just a bit sad.

Oil prices struggle in the aftermath of Europe’s summit and the “last chance” to save the euro left a lot to be desired in the minds of many traders. Many are calling it a missed opportunity while some hold onto hope that the zone has taken at least a step in the right direction. The plan to strictly enforce budgetary discipline across the Eurozone nations is like trying to close the barn door after the animals have escaped.

S&P isn’t impressed with the euro plan and neither is the market. Bloomberg News said that, "Europe’s failure to agree to a comprehensive solution to the sovereign debt crisis threatens to consign top-rated bonds in the region to history. Moody’s Investors Service said today it will review the ratings of all European Union nations after last week’s summit failed to produce “decisive policy measures.” That followed Standard & Poor’s Dec. 5 announcement that it may cut the ratings of 15 euro-region members, including AAA rated Germany and France, because of a “reactive and insufficient” response to the crisis.”

China is adding to the uncertainty as there are more signs that their economy is slowing. Bloomberg News reports that their exports are slowing. Bloomberg News says" Chinese Premier Wen Jiabao and officials meeting to map out economic policies for 2012 may be encouraged to add more stimulus as a shrinking trade surplus shows Europe’s debt crisis hitting exports. Overseas shipments rose 13.8 percent in November from a year earlier, the weakest growth since 2009, according to customs data released Dec. 10 in Beijing. The excess of exports over imports fell by 35 percent. The decline in the surplus and signs that capital has started to flow out of the country may prompt the government to keep cutting banks’ reserve requirements to sustain growth. Sliding exports to Germany and Italy weighed on gains in shipments to emerging nations, and President Hu Jintao yesterday marked 10 years in the World Trade Organization by warning that the global economy faces “severe” challenges."

OPEC is lowering its demand expectations for the world by about 100,000 barrels of oil per day. Now the question is whether they have the ability to lower production by the same.

The CME Group is getting ready for the battle of the Brents! As volume and interest in the Intercontinental Exchange Brent Crude contract, the CME Group is getting ready to create its own Brent contract. The CME's Brent 25-day contract will be for delivery on February 2012, while the first month for ICE's Brent NX contract is December 2012. Let the battle begin!

Despite the negativity in the marketplace we think oil is getting ready to rebound! The first sign of bullish news and oil should soar. You can use the weakness to buy call spreads.

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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