Economic turmoil in the European Union over Greece and U.S. crude inventories coming in at an almost 80-year high helped grease the skids for the oil market selloff. While oil looks like it hit a bottom, the biggest threat to that call would be a European crisis. Deflationary pressures in Europe have been a major factor in the oil sell off. Yet with the EU going to QE and the rest of the world adding stimulus, the threat of deflation should diminish somewhat. But, if we get the markets fearing a Greek exit from the Eurozone, that could wipe away some of the good that the quantitative easing was supposed to do. Yet the market’s reaction to the latest shot fired by the EU declaring that it would stop accepting Greek bonds as collateral for central bank loans.
Greece's new finance minister, Yanis Varoufakis, is trying to cut a deal to restructure its debt. He has urged Germany not to humiliate the country over its debts and has dropped hints that they do not need more money and even inferred they could get chummy with the Russian Federation. Greece had been trying to play hardball but Mario Draghi the ECB Chief seems like he can play that game. The European Central Bank abruptly canceled its acceptance of Greek bonds in return for funding. Reuters says that “The move, which means the Greek central bank will have to provide its banks with tens of billions of euros of additional emergency liquidity in the coming weeks, was a response to what many in Frankfurt sees as the Greek government's abandoning of its aid-for-reform program.” While the markets seemed concerned initially now it appears that they seem to like the tough approach.
So if oil can rebound even in the aftermath of one of the most bearish reports in history, at least by supply standards, is it possible that the market is looking beyond the glut? The Energy Information Administration added to the bearish sentiment yesterday. The EIA U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 6.3 million barrels from the previous week. At 413.1 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years. Gasoline supply also surged 2. 3 million barrels and distillates by 1.8 million barrels. So much for the cold weather! I think if we close these markets higher today that will be a strong sign that oil is at a solid bottom area.
EIA also reported that U.S. crude oil refinery inputs averaged over 15.5 million barrels per day during the week ending January 30, 2015, 288,000 barrels per day more than the previous week’s average. Refineries operated at 89.9% of their operable capacity last week. Gasoline production decreased last week, averaging 9.1 million barrels per day. Distillate fuel production decreased last week, averaging about 4.7 million barrels per day.
You can now follow me on Twitter @energyphilflynn! You can also like me on Facebook. Traders save money on fancy software and try out my wildly popular trade levels first! Call me at (888-264-5665) or Email email@example.com. If you want to start trading apply by hitting this link https://newaccount.admis.com/?office=269
Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses.
The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks.