Energy Price Outlook
The market may continue to be jostled by the unpredictable just as it has in the last few days. Wednesday’s trade fell on bearish news from higher oil production figures in the weekly EIA report, but ignored support from an overall drop in inventories and growing tensions between Israel and Iran. Yesterday’s trade, on the other hand, focused more on growing tensions and looked past the production build. China finally providing stimulus to its economy, but it was a move which had been expected for several weeks. The only thing we can say with certainty today is that it’s Friday, the Oct gasoline and heating oil contracts will expire, and the Chicago PMI will be released. Chinese official manufacturing PMI will be out on Sunday night. Resistance in WTI will be at the 50-day MA at $93.55 while support will be at $90.00.
November WTI closed $1.87/bbl higher while Brent advanced $1.97/bbl. The day began with support from China, which injected CNY180B in money market funds. The move was viewed as a precursor to additional stimulus next month, and caused a sharp 2.6% rally in the Shanghai composite. Oil was further strengthened by the pre-release of the speech to be delivered by Israeli PM Netanyahu at the UN in which he issued an ultimatum to Iran when he told them to halt their nuclear ambitions or risk coming under attack. Spain issued its 2013 budget, which was met with some approval in the euro currency. The government said it would cut spending on social programs and not hike taxes. It also said that its 2012 revenue target would be met, which relieved pressure on those worried about immediate needs for a bailout. The euro advanced 0.40 points while Spanish yields fell 12 bps.