Ah yes! Tis the season for our bottom in oil. Oil prices, as if almost on cue, rallied strong on Black Friday as shoppers were spending money, good data came out of China and good old fashion winter weather. Yet behind the rally we also had concerns that the power grab by the Egyptian President could add another layer of uncertainty as we move forward.
Protests grow in Egypt after President Mohamed Morsi decided to grant himself more power. Rival factions get ready to protest, increasing worries that we could see an outbreak of violence. Of course the Egyptian President was the go-between from Israel to Hamas in a truce that seems to be holding.
Oil inventories had a much larger than expected drop last week. It appears that the after effects of hurricane Sandy had imports coming back that had been diverted from the Gulf Coast. East Coast distillate supply is about 47% below the five-year average raising concerns of supply tightness if the weather gets cold. This week we should rebound a bit. Look for crude oil to be up 3 million barrels, gas up 2 distillates up 1.5 and runs up 0.5.
On the downside, economic risk in Europe could send oil tanking. EU leaders need to come to a conclusion on a Greek bailout as they are supposed to be running out of money. In Spain the Catalonia region voted for independence but at the same time seemed to vote against its leader failing to give a mandate.