West Texas Intermediate crude oil (NYMEX:CLU13) got smashed into contract expiration as the reality of a glut of supply and seasonal realities began to sink in. Even with reports of violence at Libyan oil ports and threats of force by the Libyan government, oil succumbed to a glut of supply. Reports and rumors of a problem with the Seaway pipeline, the important outlet for oil from Cushing, Okla., added to the late day price drop driving oil below the 50-day moving average. Taper talk and Fed minutes today could add to the downward pressure as rising yields in the U.S. and Germany will make the emerging hot money markets not so hot.
Still the Libyan labor issues are becoming more serious by the day. Reports of black market oil offers and the refusal caused the Brent-WTI spread to surge to its widest level since last July. Reports of a car bombing that killed a Libyan soldier and the Libyan navy seizing a tanker that was accused of trying to steal oil added to the tensions. Libya has already called a Force Majeure on some contracts and the conflict is a danger to the Libyan economy whose major export happens to be oil.
Reports of the violence caused both RBOB and Heating Oil to rise only to sell off later on the WTI sell-off. Still the entire petroleum complex looks like it is getting ready to fall as the Fed will layout taper plans and the seasonality's of weak demand dominate. We could see one more pop, but absent of any big news out of Libya we could start a major sell-off.
Other markets are also getting ready for the great taper. Precious and Industrial metals are pulling back a bit as the approaching Fed Minutes are becoming a major market event. The metals also are waiting for manufacturing data from China.
Another Issue that may cause a bit of worry is Syria. Dow Jones by AFP reports "The U.K. government said it will raise at the United Nations Security Council reports that forces loyal to Syrian President Bashar al-Assad have carried out another chemical weapons attack near the capital Damascus. U.K. Foreign Minister William Hague said he was deeply concerned by the reports that hundreds of people had been killed by air strikes and a chemical weapons attack on rebel-held areas." Syrian authorities have denied that the army used chemical weapons Wednesday, the AFP news agency reported.