Strong data out of China and a massive diplomatic push by John Kerry to sell Europe on a Syria attack has the petroleum complex twisting in the wind. Oil prices (NYMEX:CLV13) seem to have a bit of an upward bias after traders tried to adjust the timing and amount of a reduction in Fed bond purchases after a bad jobs report. RBOB looks a bit heavy and heating oil seems a bit friendly, which seasonally would make sense. Still with a lot of uncertainty overhanging the market, it is hard to embrace a major position in either direction.
Crude has rallied for weeks as the march to war and falling supply in Cushing, Okla. have underpinned the market. High quality crude in short supply in Europe has caused U.S. exports of diesel and gas to surge. Uncertainty and falling Libyan production have lent support. Oil has to worry about a potential strike in Syria.
Add to that rising demand expectations as China's August export rose 7.2% to $190.7 billion, up from July's 5.1% growth. This comes as China's inflation readings were tame. China's producer price index (PPI) fell 1.6% in August from a year earlier, compared with a 2.3% drop in July, the National Bureau of Statistics (NBS) said on Monday. The index, which measures inflation at wholesale level, has been in negative territory for 18 consecutive months.
Then you have Syria.
John Kerry is making his case and the President is set to address the American people on Tuesday. Syrian President Bashar al-Assad is also making his case. The Independent Reports:
Syrian President Bashar al-Assad has denied that he had anything to do with the alleged Aug. 21 Damascus chemical weapons attack, in his first interview on American television for two years. Speaking to CBS's Charlie Rose, Mr. Assad said: "There is no evidence that I used chemical weapons against my own people." The interview in full is not set to be aired until late tonight, but Mr. Rose has appeared on the network's Face the Nation to reveal what he discussed with the Syrian dictator. "He denied that he had anything to do with the attack – he denied that he even knew there was a chemical weapons attack," Mr. Rose said. And while Mr. Assad refused to confirm or deny whether his government has chemical weapons at its disposal, he stressed that even if they did their use would be under centralized control – so they could not be fired without his knowledge.
With U.S. President Barack Obama waging a full-scale media campaign to get Congress's backing for military action, Mr. Assad used the interview as an opportunity to warn the American people "that it had not been good for them getting involved in conflicts in the Middle East before and that they should tell their Congressmen not to authorize a strike." The Syrian leader reportedly reiterated his belief that there was no evidence his government used chemical weapons on its own people, and said that if the Obama administration did have conclusive evidence then it needed to show it to the world and make its case openly.
Mr. Assad said that he did not know whether a U.S. missile strike would take place, but that he was "very concerned" that if it did it would significantly degrade his military's strength and could even sway the course of the civil war. He added that his country was as prepared as it could be for an attack, and warned that any strike would be met with retaliation from both Syria and the countries "aligned with him" – his principle allies being Iran and Russia. Mr. Rose concluded by saying that Damascus seemed remarkably calm in the areas he had seen, and that there was a clear sense that the Syrian people are "closely watching events in Washington."