Oil concerns turn back to Fed tapering

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Overnight it seems that oil (NYMEX:CLU13) is now worried more about the prospects of the Fed tapering than all other global geopolitical and storm worries. Strong data out of Europe is offsetting concerns over a crackdown by the Egyptian military on Muslim Brotherhoods protestors. Libya is making no promises on oil deliveries in the aftermath of dockworker strikes that have disrupted production. Iraq is going into major maintenance and the Tropics are heating up! But watch out the Fed may change the rules of the game.

Reuters reported that “German and French economies grew faster than the United States in the second quarter, pulling the Eurozone out of its longest recession. Growth in the 17-country bloc was 0.3% from the previous quarter, with its two biggest economies both revealing unexpected strength, data from the European Union's statistics office Eurostat showed.  A Reuter’s poll had forecast 0.2%. Germany grew 0.7%, its largest expansion in more than a year thanks largely to domestic private and public consumption.’’

France's economy expanded 0.5%, pulling out of a shallow recession to post its strongest quarterly growth since early 2011. The turnaround was driven by consumer spending and industrial output, although investment dropped again.  That compared with around 0.4% growth in the quarter — 1.7% annualized — in the United States, considered one of the bright spots of the global recovery.”

The API was a mixed bag but another build in Gasoline supply is giving us a bit of a bearish edge. The API reported a ho hum 999,000 barrel drawdown in oil and a 1.4 million barrel drop in Cushing Oklahoma. Distillates also rose! Bring on the Energy Information Administration report.

Natural Gas (NYMEX:NGU13) has been perking up and it may have to do with the weather. Not Hot Weather but the kick up in tropical storm activity. Not only does the National Hurricane Center map have two storms circled with a 30% and 40% chance of becoming a tropical cyclone in the next 48 hours, some weather forecasters are saying that this may just be the beginning. Bloomberg News reported that AccuWeather Inc. is warning that the Atlantic hurricane season is about to enter it’s most active phase as conditions for the powerful storms improve across the basin. Dan Kottlowski, an expert senior meteorologist at AccuWeather Inc. in State College, Pennsylvania says that “There are six or seven blobs of thunderstorms marching across Africa right now, some of these will be tropical waves. Next week looks very promising for development over the eastern Atlantic.” They remind us that the Gulf of Mexico is home to about 6% of U.S. natural gas output, 23% of oil production and more than 40% of petroleum refining capacity, according to the Energy Department. The Bay of Campeche, at the southern end of the Gulf, is where Petroleos Mexicanos, Mexico’s state-owned oil company, has most of its production. Florida is the second-largest producer of oranges after Brazil.

Man, India really wants to continue to put the kibosh on any gold rally. Just as it looked as metals were going to explode, India again put new import duties on gold and silver? Why is India freaking out about the strong demand for metals in their country? It may be because they are worried about the trade deficit or dollars leaving the country. Perhaps it is because they realize that the big money interests in India are worried about the purchasing power of the rupee. If The Fed is looking for a sign of inflation look no further than India. Their inflation wholesale price index increased 5.79% from last year. This was the biggest gain in five months and blew away June’s 4.86% reading and expectations for a 5% gain. If you have your money in rupees, you might want to move to gold to protect your wealth. Or you may just need to wear some serious bling.

Of course the drop in the gold price has forced smaller miners out of the game. The physical side continues to tighten and record demand for silver coins is being reported. In India they are going to the black market to get their bling.

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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