Oil prices are falling as a sharp rise in yields is raising concerns that the Fed may be closer to tapering off on bond purchases. With the stock market finally giving up on a rally and even the short end of the yield curve actually moving (it can do that you know) the case for oil has just got a bit more bearish. The housing price surge is going to push the Fed into the moderating demand expectations "great taper" and the resurgent dollar. Near record supply in the U.S. may start to feel like near record supply.
This comes despite all of the concerns that the Syrian conflict could spin out of control. The EU and Senator John McCain seem to be getting ready to clear the way for arming Syrian rebels. In response the Russians are threatening to send even more arms and missiles to the Syrian government, even more than they have already provided. Israel has threatened that if they do then they will be forced to take those weapons out. Now the Syrian rebels say they are getting ready to attack Hezbollah in Lebanon.
Does this sound scary? Well not as scary to the market as the possibility of tapering off of bond purchases and the prospect of higher U.S. interest rates.
OPEC is scared of rising U.S. production and the Saudis are going to use this as an opportunity to send a message to the hawks in the cartel. Saudi Aramco increased production to an all-time high. Saudi Arabia is looking to solidify market share while the Iranians and Venezuelans struggle. Light sweet producers in Africa are also losing share. The Saudis are in no hurry to help Iran and Venezuelan. Perhaps they should have been a bit nicer to the cartels swing producer. Natural gas pulled back on option expiration and moderating temperatures. The market also acted inversely to oil once again.