Something interesting happened yesterday: instead of rising on falling crude prices, the stock market sold off, and sold off big.
CL – January vs S&P 500 futures
A week ago stock markets surged in tandem with a huge drop in the price of oil. Since then oil had been mostly trading in a sideways range, until continuing to sell off yesterday. What’s unusual – and definitely a departure from what we have come to expect, is that markets tanked even as oil itself declined.
This is the first significant sign of a decoupling of these two markets which have been linked for a long time now. It probably signals that markets believe crude oil’s decline is closer to the end than the begining, and thus one of the legs underneath the stool which the market had been sitting on may be in the process of being taken away. Its not actionable information today, but useful to note for the future.
Weekly Inventory Reports – Up or Down?
From the EIA Weekly Report:
U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) increased by 0.6 million barrels from the previous week. At 293.9 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Distillate fuel inventories rose by 1.4 million barrels last week, but are just below the lower end of the average range for this time of year. Almost all of the increase was seen in low-sulfur (diesel fuel) distillate fuel. Total motor gasoline inventories increased by 2.4 million barrels last week, and are at the top of the average range. Total commercial petroleum inventories rose by 5.7 million barrels last week, and are around the middle of the average range.
Yet the American Petroleum Institute weekly status report, also released today, had this to say:
The American Petroleum Institute (API) said today distillate inventories fell. For the week ended Dec. 3 inventories dropped 1.2 million barrels to 120.8 million. Crude stocks rose 583,000 barrels to 295.1 million, gasoline stocks rose 2.6 million barrels to 207.3 million barrels.
With daily contradictions coming in, even on base statistics which you would think are absolute, is it any wonder that we let price be our primary guide?
04.12.08 11:53 #