Oil gets a boost from Draghi promise

Stimulating Talk

Forget about that so called bearish Energy Information Administration inventory report, oil rebounded big time on stimulating talk. I am talking about the fact that the Fed is getting ready to act on our floundering economy.

An 8.4% plunge in new homes sales added to the speculation, especially after an article in The Wall Street Journal that suggested that the Federal Reserve is unhappy with the way the economy is slowing and is getting ready to act. The gold and silver were positively giddy on those hopes, rallying all day but oil had to contend with the weekly inventory report that on the surface looked pretty darn bearish.

Crude rose by 2.7 million barrels but that was just a blip as compared to the whopping 4.1 million build in gasoline supply. It seems that all that gas supply that seemed to disappear in recent weeks finally showed up. We saw a surge in refinery runs and imports as the aftermath of the tropical storm is finally behind us.

Yet after the petroleum markets fell it was hard to ignore the stimulating move in precious metals and oil rebounded. Overnight at first oil pulled back as global concerns and the fact that anticipating that Ben Bernanke would act has not really been a profitable trade.

Yet according to Dow Jones, "Oil prices turned positive Thursday, after encouraging statements from European Central Bank President Mario Draghi helped boost the euro, prompting oil to reverse earlier losses.” They said the market got a slight boost after the ECB's Draghi said the central bank would do "whatever it takes" to preserve the euro, despite lingering worries that Spain may require a sovereign bailout and that the current measures will not be sufficient to prevent Greece from being forced to exit the currency bloc.

Yet Draghi has been known to disappoint the bulls in the past as well and there is rising speculation that there is no way that Greece will be able to stay in the zone. With a big payment coming up and no money, the EU and the Fed is going to have to act fast to keep this rally going.

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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