Oil focuses on Fed meeting as inventories take backseat

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Oil prices have continued to move higher in anticipation of a friendly outcome to today’s U.S. FOMC meeting. The market has been trading this week on a view that the Fed will remain status quo on its QE and monetary policies in general and give no indication as to when they will be entering a winding down phase. The market will parse every word of the communique as well as how Mr. Bernanke answers questions at the presser after the meeting. The macroeconomic data out of the U.S. has been improving since the last Fed meeting. The main question the market is looking for an answer to is whether the data is improving enough to push the Fed into their winding down phase or are all systems go for a continuation of the massive QE program currently in place?

The G8 meeting ended with a watered down communique… as expected. Nothing further on any major western involvement in Syria with the U.S. still likely going forward with trading and arming the opposition group with small arms. Russia remained the sole dissenter on Syria. For now it does not look like there will be any immediate surge in military activity from the west that could result in an interruption of oil supply from the greater middle east. A modest risk premium remains in the price of oil.

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