The folowing is an excerpt from O&F News & Views weekly newsletter
It seemed as though the bears were licking their chops at the beginning of the week as news continued to point to robust supplies on hand and no serious threat for disruptions in the immediate picture. However, as the energy complex continued to show strength, most had to concede…
that the market will continue to shrug off bearish supply news just as long as these $60+ Crude Oil prices can’t be tied to dragging down the world economy.
Sure there are plenty of geopolitical issues one could point to that would bolster the argument for the bulls. For example the Niger Delta conflict has knocked about 455,000 b/d of high grade, light sweet Crude Oil production offline and aside from a allowing some low collateral hostages free, the stand-off with the MEND rebels doesn’t seem to be getting any closer to resolved. It will be interesting to see if they follow through on threats of more disruptions over the weekend. The other obvious issue from abroad comes from Tehran’s insistence upon moving forward with its own uranium enrichment despite the objections from the U.S. and Europe. The obvious concern here is that the U.N. could impose an embargo or Iran itself could stop the flow of oil in protest to a referral to the Security Counsel. While both of these scenarios are unlikely due to the extreme affect such a move by either side would have on the world economy, they nevertheless are reminders that the entire crude oil market is dictated by a few key players and could be turned on its head by any one of them.
The Distillates reported a slight draw this week and while refineries are making the switch between seasons we are getting some forecasts for cooler temps over the weekend. This obviously helped carry the Heating Oil markets back above their 4 week highs around 180 and will be supportive in the coming weeks if temps remain cool. I think we are making a convincing run to the upside across the board and we will continue to hold our Call Option Spreads on Crude and Natural Gas into next week
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