Oil falling as Fed wields influence over markets

Fed fallout

For those that have doubted the impact that the Federal Reserve has over commodity prices, last week's action should put those arguments to rest. The funds went flying out of oil as the Fed started to be more specific on tapering and even some Fed officials tried to calm the hysteria. The hedge funds seemed to taunt Fed Chairman Ben Bernanke’s commitment to easing stimulus by building up a large long position. Now the Bulls are scurrying like rats off a sinking ship as the Fed and the unfolding credit crunch in China is making them question just why in heaven’s name they were long in the first place.

The funds fled the gold market as well.  Bloomberg News reported that "hedge funds cut bets on a gold rally by the most since February after the Federal Reserve laid out plans for reducing stimulus and this year's drop in the value of exchange-traded products extended to $55 billion. Speculators reduced their net-long position by 29% to 38,951 futures and options by June 18, U.S. Commodity Futures Trading Commission data show. Holdings of short contracts jumped 14%, the most in eight weeks. Net-bullish wagers across 18 commodities slid 2.2% as investors became more bearish on copper and wheat."

The Lundberg Survey is out and as reported by Bloomberg "The average price for regular gasoline at U.S. pumps fell 4.16 cents in the past two weeks to $3.5969 a gallon, according to Lundberg Survey Inc. The survey covers the period ended June 21 and is based on information obtained at about 2,500 filling stations by the Camarillo, California-based company. The average, which reached a year-to-date peak of $3.795 in the period ended Feb. 22, is about 12 cents above the year-earlier price of $3.478 a gallon."

Natural gas in the short term has been weak but with rising temperatures and a President who is going to assault energy prices are bound long term to work back higher. The Washington Post reports that "President Obama will announce his intention to limit greenhouse gas emissions from existing power plants, increase appliance efficiency standards and promote renewable energy development on public lands in a speech Tuesday outlining his plan to use executive powers to address climate change."

For those that have doubted the impact that the Federal Reserve has over commodity prices, last week's action should put those arguments to rest. The funds went flying out of oil as the Fed started to be more specific on tapering and even some Fed officials tried to calm the hysteria. The hedge funds seemed to taunt Fed Chairman Ben Bernanke’s commitment to easing stimulus by building up a large long position. Now the Bulls are scurrying like rats off a sinking ship as the Fed and the unfolding credit crunch in China is making them question just why in heaven’s name they were long in the first place.

The funds fled the gold market as well.  Bloomberg News reported that "hedge funds cut bets on a gold rally by the most since February after the Federal Reserve laid out plans for reducing stimulus and this year's drop in the value of exchange-traded products extended to $55 billion. Speculators reduced their net-long position by 29% to 38,951 futures and options by June 18, U.S. Commodity Futures Trading Commission data show. Holdings of short contracts jumped 14%, the most in eight weeks. Net-bullish wagers across 18 commodities slid 2.2% as investors became more bearish on copper and wheat."

The Lundberg Survey is out and as reported by Bloomberg "The average price for regular gasoline at U.S. pumps fell 4.16 cents in the past two weeks to $3.5969 a gallon, according to Lundberg Survey Inc. The survey covers the period ended June 21 and is based on information obtained at about 2,500 filling stations by the Camarillo, California-based company. The average, which reached a year-to-date peak of $3.795 in the period ended Feb. 22, is about 12 cents above the year-earlier price of $3.478 a gallon."

Natural gas in the short term has been weak but with rising temperatures and a President who is going to assault energy prices are bound long term to work back higher. The Washington Post reports that "President Obama will announce his intention to limit greenhouse gas emissions from existing power plants, increase appliance efficiency standards and promote renewable energy development on public lands in a speech Tuesday outlining his plan to use executive powers to address climate change."

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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