Bond Room Blitz!
Oil prices got smashed as the globe looks to global bond auctions to determine the survival of the Eurozone and by default, perhaps the prospects for the global economy as a whole. The bond vigilantes own the globe and all the cards are in their hands. If they buy your debt, perhaps we will survive and if they don’t, watch out! Record high yields on the Italian five-year note auction and a record low yield on the 30-year US bond auction clearly showed the stresses the globe is feeling! Yet could a decent Spanish auction save the day! Oil traders are watching the dollar and stocks. The euro breaking 1.30 was a key fear indicator and gold closed below the 200-day moving average! Buckle up Santa, it is going to be another wild ride!
Oil prices also were not helped by a surprising build in gasoline supply. We already knew demand was bad so why did production go up? According to Bloomberg News the MasterCard Spending Pulse showed that U.S. gasoline demand fell 3.4% last week, the biggest drop in 14 weeks. But that was lost on refiners because according to the EIA, who reported an increase in gas production to the tune of averaging 9.5 million barrels per day and in inventories of 3.8 million barrels, that's still way above the average range for this time of year.
The reason maybe two fold. One, refiners are getting ready for an increase in demand for the Christmas Day holiday but the other reason is that refiners are maxing out diesel as we are now a key exporter. The world is definitely changing.
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.