Oil following fiscal cliff talks; inventories and Middle East secondary

The following table compares my projections for this week's report (for the categories I am making projections with the change in inventories for the same period last year. As you can see from the table last year's inventories are mostly in directional sync with this week's projections. As such if the actual data is in line with the projections there will be minimal changes in the year over year inventory comparisons for crude oil. 

I am keeping my view at neutral with a bias to the neutral side for today primarily due to the evolving geopolitical situation in the Middle East and the Greek deal on financial aid. At the moment there is still no shortage of oil anyplace in the world and the part of the risk premium in the price of oil in anticipation of a spreading of the fighting taking place between Israel and Hamas as well as the civil war in Syria is still in place.

The geopolitical risk has been the main bullish price driver for oil as the current fundamentals as well as the slowing of the global economy are both biased to the bearish side for oil. In the short term the price of oil will move based on the evolution of the situation in the Middle East and the markets view as to the state of the global economy. This is still an event driven market for oil at the moment.

I am keeping my Nat Gas price view at neutral as the fundamentals and technicals are once again suggesting that the market may have topped out for the short term. I anticipate that the market will remain in a trading range until it becomes clearer as to how the heating season will evolve. As I have been discussing for weeks the direction of Nat Gas prices are primarily dependent on the actual and forecasted weather pattern now that we are in the early stages of the winter heating season.

Markets are lower heading into the US trading session as shown in the following table.

Best Regards,

Dominick A. Chirichella

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