1,000,000 Barrel Solution
They agreed to an 800,000-barrel-a-day output hike at the meeting in Vienna
Sunday, but the market consensus was looking for more. Despite the agreement by
OPEC to boost production by what amounted to a 3% hike at its closely watched
meeting, October crude oil
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PowerRating)Â opened higher and sprinted to fresh
10-year and contract highs for a net gain on the day of 1.51 to 35.14.
Approximately 500,000 to 700,000 barrels is the amount that OPEC participants
already currently “cheat” by and has already been factored into the price.
The market was hoping for a 1,000,000 barrel output rise, and the OPEC production promise is
seen as too little and too late.
Heating oil
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List, made the biggest percentage gain, rising 5.5%, or .0551 to 1.0500, also moving to a new contract and 10-year high. Heating oil has the largest stockpile deficit and is down nearly 40% from last year.Â
In the long run, OPEC’s muted response to the tight
global supplies situation will reduce global dependence on oil through
conservation, higher levels of non-OPEC production, and alternate
technologies/sources. In the short run, the lower production levels that have
resulted in higher prices will slow the global economy by causing the
dislocations, dry fuel pumps and protests that were seen in Europe (France,
Britain, Belgium and Italy) over the weekend. The higher oil prices could also
force European governments to lower fuel taxes in response to the
demonstrations. Taxes make up, on average, 75% of the price of a continental liter
of gasoline.Â
Rising energy prices will act as a speed bump in Europe’s
drive to revitalize its economy and will hinder progress made toward alleviating
slow growth and high unemployment. The OPEC action and higher oil prices acted
to further deteriorate euro FX futures
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PowerRating), which fell .01100 to .85890.
Eurocratic disunity in currency policy has also reduced the threat that the
European Central Bank will intervene to support the euro. Joining the euro FX on
the Implosion-5 List,
British pounds
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movements with the highly correlated euro, Swiss francs
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red ink spilled on continental currency futures and gained .0018 to .5642. It
will be interesting to note if this divergence is an early indicator of a
turnaround in the euro or a flight to safety play.
From the Momentum-5
List, dollar index futures
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Although stock index futures could not hold onto early
gains made in the blue chips, four signals from the
Market
Bias Indicators Page still leave a positive slant for the indexes
tomorrow.  Â
December gold
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PowerRating) inched a Turtle Soup Plus One Buy
signal Friday, and although the contract closed flat at 276.8, it is
interesting to note that precisely one year ago, gold also traced a Turtle Soup
Plus One Buy signal that went on to log a one-month, $75 pop. Gold is very
dollar sensitive and Monday’s beefy gain in dollars–and flat close for
gold–bodes well for the contract to come off its lowest level of the year,
especially in light of $35-a-barrel oil.Â
October sugar
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PowerRating), down .27 to 10.40, has traded
in a range on highs for six weeks. Until there is a serious break from the
developing base, look to trade the contract within the confines of the
well-established range.Â