UK Prime Minister David Cameron is seeing red lights, and it’s not just Christmas lights. At the G-20 summit Cameron said “red warning lights are flashing on the dashboard of the global economy” and that the crisis that brought the world to its knees may happen again. He said that “the eurozone is teetering on the brink of a possible third recession, with high unemployment, falling growth and the real risk of falling prices too.” Maybe the Prime Minister looked at the oil pressure gauge, it has been flashing red warning signs for some time. The debate for oil was how much of the sell-off was caused by over production or by slowing demand. Cameron worries that the signs do not bode well as recession and deflation fears have knocked oil for a loop, not to mention desperate OPEC producers.
Yet it is not just European warning lights. What about Japan? Japan's GDP fell to an annualized 1.6%. Gross Domestic Product (GDP) from July to September, compared with expectations for 2.1% rise. Economist says that after a previous 7.1% drop Japan is still in a technical rescission. That came after the bank of Japan last month announced asset purchases of yen at an annual pace of around 80 trillion yen, which was an increase from the previous 60 to 70 trillion yen target range. Maybe another $80 trillion will do it.
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That news along with fears that the EU will slap Russia with more sanctions is setting a weak tone for oil. What is supportive is the cold weather. Winter has arrived with a vengeance and that should lend some support on breaks. We should also see a drop in gasoline demand as many folks stayed home.
This week we look for crude supply to drop by 1 million barrels. Gasoline supply should go up by 1 and distillates up 2. Runs should rise by 0.1%.
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