Oil spooked by surprise inventories build, downtrend continues

Spooky Fed

The FOMC zombies wanted to spook the stock market bulls by trying to make them fear that maybe just maybe that they could taper sooner than the bulls want to believe. Boo! What is scarier than a Federal Reserve that has lost any sense of forward guidance and has misled the market in the past? The ghosts of the government shutdown do not exist. It seems that bad economic data is invisible to the Fed. The FOMC is acting like a group of poltergeist replaying some scene from the past without any cognizance of current events. Maybe it is the Fed that is locked in fear but giving a statement that would not resurrect the bond vigilantes and at the same time temper a stock market that has no fear.

Who dares enter the long side of the energy complex? It's close to midnight and something's selling oil in the dark. Under the moonlight, you see a drop that almost stops your stop. You try to scream, but the market takes the trade before you make it. You start to freeze, as losses looks you right between the eyes, You're paralyzed! The EIA thriller bull killing report. Oil bulls (NYMEX:CLZ13) were terrorized by a 4.09 million barrel build in U.S. crude supply increasing supply to a whopping 383.87 million barrel glut. Reuters says that "U.S. oil futures are on course for their worst month since February, having fallen nearly 6% so far in October amid a sustained increase in stockpiles in the world's top oil consumer, even as the Federal Reserve left its economic stimulus intact." Do you see why we are targeting $88?

In contrast, risk to Brent supply has given that market support. Reuters reports that Brent crude edged lower on Thursday, but held up well above $109 a barrel and is set to end October with its fourth monthly gain in five, bolstered by disruptions to shipments from key producer Libya. News that the strife-hit OPEC member hopes to resume exports from its key Mellitah port within 10 days helped weigh on prices, although the current shipment pace of around 150,000-200,000 barrels per day of crude remains a fraction of the country's 1.25 million bpd capacity. U.S. oil futures are on course for their worst month since February, having fallen nearly 6% so far in October amid a sustained increase in stockpiles in the world's top oil consumer, even as the Federal Reserve left its economic stimulus intact.  U.S. crude's losses have widened its discount to Brent to around $13, near six-month highs reached last week. Brent crude for December delivery was down 33 cents at $109.53 a barrel by 0541 GMT. The crude benchmark is up 1.1% in October.

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.

 

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