Oil supported by attacks despite Moody’s downgrades

Not Showing Any Love

Moody's did not exactly send a Valentine to the global markets yesterday. Downgrades across Europe are putting deflationary pressure on the metals, but oil seems to be getting support from increasing geopolitical tension. With Moody's getting moody, they cut the ratings of Italy, Malta, Portugal, Slovakia, Slovenia and Spain and lowered the outlook for Austria, France and the U.K. It seems that deflationary pressures are rising across Europe and perhaps the globe. We are seeing markets like copper, cocoa and precious metals fall but oil seems to be getting support from news of an attack on the Israeli embassy in New Delhi, India and an attempt in Tbilisi, Georgia. Israel blamed the attacks on Iran but Iran denied any involvement.

The attacks raise the risk premium in oil as the odds of some type of conflict are rising.

There is a bit of surprise with Japan adding more stimulus to bolster their slowing economy and a bigger than expected drop in Eurozone manufacturing. There are also worries that Obama's new taxes on the energy industry will add more pain to consumers already struggling to overcome the government’s regulations. Barack Obama proposed to cut more than $40 billion in tax breaks for oil, gas and coal producers in the next decade and to spend more for conservation and alternate energy. Apparently he wants more Solyndra at the expense of the American consumer. The President is overseeing record high gas prices for this time of year as demand is falling because of his policies.

Penn Energy reports that, "Proposed US Environmental Protection Agency regulations directed at refiners could put several US refiners out of business and place others at a significant disadvantage to overseas petroleum product manufacturers, American Petroleum Institute officials warned. “At the same time, data suggest that the environmental benefits would be modest. The API says that, “While the specific elements of these have not all been set forth, they could constitute a veritable tsunami of added requirements that could put some refineries out of business, diminish US fuel manufacturing capacity."

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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