It is possible that the U.S. will actually do the unthinkable and defaults on its debt. While the markets have priced in some fear in the short term end of the yield curve and a rising VIX, the truth is that the market is taking this debt deadline with surprising calmness. Some of that of course may be the fact that the odds of Fed tapering are gone for the foreseeable future. So even with Fitch threatening the United Staes with a downgrade, the political theatrics will continue.
How come it seems like the talks with Iran over their nuclear program seem to be going better than the talks in Washington? While the White House is trying to play down expectations for the multi-country negotiations it seems that Iran is offering some substance. The AFP reports that Iran's top negotiator said Wednesday that a nuclear proposal presented to major powers in Geneva does allow for snap inspections of the Islamic republic's nuclear facilities, clarifying earlier remarks. "None of these issues exist in the first step, but they are part of our last step," Abbas Karachi was quoted as saying by the official news agency IRNA. He was replying to a question about whether an additional protocol to the nuclear Non-Proliferation Treaty, which allows unannounced inspections of Iran's nuclear sites, was included in the proposal. Araqchi had been cited by IRNA Tuesday as saying the additional protocol does not exist “in the offer.” Of course if a deal is cut with Iran the never ending risk premium that we have had in the oil market will have to be reevaluated. For well over a decade, fears were that Israel or the United States was just days or months away from attacking Iran’s nuclear ambitions. If there is even a slight belief that these talks could provide a framework that would ease the world’s concerns over Iran’s end-game then the premium would have to reduce substantially.
Of course some of us are going to feel a little lost without the Energy Information Administration supply report. But our Friend at the American Petroleum Institute will release their report as well as Genscape. Genscape will rise to the occasion and release their data to the General Public for free to fill the void from the knuckleheads in Washington. The API on the other hand will hoard their data for their own subscribers. It seems that the API is not feeling like helping the market out with a public release.
Oil did break $101 (NYMEX:CLX13), which means that we should trend lower with high volatility. Our trade levels have been navigating the swings. Natural gas double-topped at $4.00 as the trade says bring on the cold. With no data, it is going to be the technical and the weather that will dominate trade. Natural gas is overbought, but a break above $4.00 basis December might cause a rally that might surprise the already surprised bulls.