Oil following fiscal cliff talks; inventories and Middle East secondary

Quote of the Day.

There is no passion to be found in settling for a life that is less than the one you are capable of living.

Nelson Mandela

Now that a deal has been reached to provide the next batch of financial aid to Greece, the market has turned its attention to the U.S. fiscal cliff negotiations. Yesterday afternoon the financial markets were hit with a round of selling on talk that the politicians in Washington are still struggling to come up with a deal acceptable to both sides. The market is now in the 30 second news snippet mode hitting the media airwaves on comments from all sides of the negotiations. In fact there have been no negotiations this week (so far) with the President and Congress seemingly approaching the situation as if the campaign for re-election was still going on.

In my view it is time for the President and Congress to sit in a room and iron out a deal and not leave the room until it is done. This process has been going on way too long and has been creating uncertainty at every level of the U.S. economy. That said I am still of the view that a deal will be done before the end of the year deadline. Unfortunately for all market participants the process will not be smooth and games will be played and aired out in the media thus increasing the volatility of all markets over the next several weeks. Obviously the oil complex will be impacted in both directions by any and all of the 30 second news snippets hitting the media airwaves.

Global equity markets have been on the defensive since the trading week began as shown in the EMI Global Equity Index table below. The Index lost another 0.7% over the last 24 hours with all bourses losing value... mostly driven by the lack of a deal in the US. The Index has now lost about half of last week's gains and is down by 1.5% for the week to date. The year to date gain has narrowed to 5% with two bourses now in negative territory for 2012... China and Brazil. However, there are still four bourses still showing double digit gains for the year. The global equity markets have been a negative price drive for the oil complex as well as the broader commodity complex so far this week.

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