{"id":30736,"date":"2012-07-10T02:57:22","date_gmt":"2012-07-10T06:57:22","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/07\/four-things-suppressing-crude-oil-prices\/"},"modified":"2012-07-10T02:57:22","modified_gmt":"2012-07-10T06:57:22","slug":"four-things-suppressing-crude-oil-prices","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/07\/10\/four-things-suppressing-crude-oil-prices\/","title":{"rendered":"Four Things Suppressing Crude Oil Prices"},"content":{"rendered":"<p><strong>By <a href=\"http:\/\/www.MoneyMorning.com.au\" target=\"_blank\">MoneyMorning.com.au<\/a><\/strong><\/p>\n<p>The collapse of talks between Iran and the &#8220;Big 6&#8243; (the five permanent members of the UN Security Council plus Germany) should have accelerated international <strong>crude oil prices<\/strong>.<\/p>\n<p>And yes, they are higher.<\/p>\n<p>But the real spike hasn&#8217;t hit. Not yet.<\/p>\n<p><span><\/span><\/p>\n<p>The rising crisis atmosphere in the region and the genuine possibility that a fourth round of talks between the two sides will not even take place should have renewed the upward movement.<\/p>\n<p>That hasn&#8217;t taken place yet, either.<\/p>\n<p><a href=\"http:\/\/www.moneymorning.com.au\/20120525\/where-are-oil-prices-headed.html\">Oil prices<\/a> are caught between the normal dynamics of geopolitical concerns &#8211; which push prices north &#8211; and continuing concerns over a <a href=\"http:\/\/www.dailyreckoning.com.au\/a-synchronised-global-economic-slowdown\/2012\/05\/30\/\">global economic slowdown<\/a> &#8211; which results in lowering expectations.<\/p>\n<p>Now, this limbo is a delicate balance; it could change in a matter of hours.<\/p>\n<p><strong> <\/strong><\/p>\n<p><strong>Oil Market in Limbo<\/strong><\/p>\n<p>Labour negotiations between <a href=\"http:\/\/www.dailyreckoning.com.au\/norway-the-benefits-of-a-bountiful-oil-supply\/2012\/06\/21\/\">Norway&#8217;s oil<\/a> workers and employers over pay and pensions failed &#8211; yet again. Already, the strike has cut oil output by 13%, according to <em>Reuters<\/em>.<\/p>\n<p>Then there are the figures coming out from the Energy Information Administration (EIA) on Wednesday, which will almost certainly show a drawdown on U.S. inventories. Normally, that would also push up oil prices.<\/p>\n<p>However, absent an <a href=\"http:\/\/www.moneymorning.com.au\/20120529\/the-global-%E2%80%9Ctexas-standoff%E2%80%9D-over-iran-oil.html\">Iranian move<\/a> against the Strait of Hormuz or a major refinery accident somewhere in the world, the rise will be less than usual.<\/p>\n<p>That&#8217;s because right now, four things are tempering the oil price rise:<\/p>\n<ul>\n<li>Market worries over continuing Chinese expansion<\/li>\n<li>Spanish bond interest rates in excess of 7% (again)<\/li>\n<li>Sluggish job growth in the U.S<\/li>\n<li>And expectations of lower earnings reports.<\/li>\n<\/ul>\n<p>I told Fox Business on Friday that the range for <a href=\"http:\/\/www.moneymorning.com.au\/20120626\/how-a-crude-oil-price-slump-could-bury-these-countries.html\">crude oil prices<\/a> short-term should be $92-$95 a barrel in New York and upwards of $110 a barrel in London. Without the offset caused by the economic angst, each price ought to be at least $25 per barrel higher.<\/p>\n<p>I noted that using employment as a forward indicator of expected oil prices is looking at the problem in the wrong way. Job growth is the most lagging indicator factor there is. It does not telegraph a change; it registers it (in either direction) well after the fact.<\/p>\n<p>Overall economic performance is widely used as a more proximate gauge. Nonetheless, whether it is Chinese production, <a href=\"http:\/\/www.moneymorning.com.au\/20120202\/not-much-of-a-debate-inflation-is-part-of-the-us-plan.html\">US inflation<\/a>, or European performance, the projections are nowhere close to the levels doomsayers are disseminating.<\/p>\n<p>But pushing the negative side does allow short artists to get additional return while not actually playing off the market underpinnings at all.<\/p>\n<p>I recently gave a briefing to several international asset fund managers. During our conversation, I suggested that the near-term short cycles had pared between 10% and 12% of the actual market price of <a href=\"http:\/\/www.dailyreckoning.com.au\/crude-oil-the-best-bet-for-2012\/2012\/01\/10\/\">crude oil<\/a>. The figures I crunched kept telling me the market really justified a <a href=\"http:\/\/www.dailyreckoning.com.au\/the-return-of-cheap-oil-prices\/2012\/05\/04\/\">contraction of between 9% and 12% in oil prices<\/a> from early May through late June.<\/p>\n<p>What we actually received was a cut closer to 22%.<\/p>\n<p>Now granted, giving such a briefing to that crew was like lecturing the fox about raids on the hen house. Most people in that audience were orchestrating the precise artificial pressure about which I was speaking.<\/p>\n<p>Still, the quickest way to end that practice is to have a couple of major daily spikes in price to force them to cover shorts and unravel positions. Yet, until the perception of market direction changes, they are able to restructure a short movement in a couple of sessions and start the whole (artificial) cycle all over again.<\/p>\n<p>What is it going to take to break the hold <a href=\"http:\/\/www.moneymorning.com.au\/20120509\/derivative-manipulation-hits-the-crude-oil-market.html\">manipulation has placed on the oil market<\/a>?<\/p>\n<p><span>Ending Oil Price Manipulation<\/span><\/p>\n<p>We do not need a major calamity (military invasion, natural disaster, or international threats) for this to happen, although any development in that quarter would certainly raise oil prices.<\/p>\n<p>Rather, the market needs to be persuaded that a structure is developing to restrain the economic outliers.<\/p>\n<p>The rise in oil prices does not require new problems to develop.<\/p>\n<p>It merely needs the usual to return.<\/p>\n<p>And for that to occur, the market needs persuasion that the concerns are in check.<\/p>\n<p>Some of that may begin in Brussels, with the first meeting of EU finance ministers after the breakthrough accord orchestrated by heads of state on June 29.<\/p>\n<p>Normally, finance minister sessions are dull as dishwater (believe me, I&#8217;ve sat through many). This time, however, there is some urgency.<\/p>\n<p>Of course, both the EU and the European Central Bank recognize that a detailed plan will require more than a week or so to pull together. What the markets on both sides of the Atlantic need right now is reassurance that the mechanism is coming.<\/p>\n<p>This is a first step.<\/p>\n<p>There are other assurances that need to emerge as well &#8211; from Chinese central bank policies to prospects that that next extension of the <a href=\"http:\/\/www.moneymorning.com.au\/20120329\/before-the-us-debt-ceiling-hits-again.html\">debt ceiling in Washington<\/a> will not devolve into another three-ring ideological circus.<\/p>\n<p>But the bottom line is firm. The underlying forces in the <a href=\"http:\/\/www.moneymorning.com.au\/20120703\/the-big-opportunities-in-the-oil-market-that-will-lead-to-profit.html\">oil market<\/a> are not going anywhere.<\/p>\n<p><strong>Dr. Kent Moors<\/strong><\/p>\n<p><strong>Contributing Editor, Money Morning<\/strong><\/p>\n<p><em>Publisher\u2019s Note: <\/em>This article first appeared in <a href=\"http:\/\/oilandenergyinvestor.com\/2012\/07\/economic-concerns-are-offsetting-the-iranian-factor\/\"><em>Energy &amp; Oil Investor<\/em><\/a><em> <\/em><\/p>\n<p><strong><em>From the Archives&#8230;<\/em><\/strong><\/p>\n<p><a href=\"http:\/\/clicks.portphillippublishing.net\/t\/AQ\/AAt-MQ\/AAuSoA\/AAcFhg\/AQ\/A1Soqw\/xNYW\" target=\"_blank\">The Australian Housing Shortage That Never Existed<\/a><br \/>\n06-07-2012 &#8211; Kris Sayce <\/p>\n<p><a href=\"http:\/\/clicks.portphillippublishing.net\/t\/AQ\/AAt-MQ\/AAuSoA\/AAcCaw\/AQ\/A1Soqw\/IYCf\" target=\"_blank\">Did the European Summit Change the Market Trend?<\/a><br \/>\n05-07-2012 &#8211; Murray Dawes <\/p>\n<p><a href=\"http:\/\/clicks.portphillippublishing.net\/t\/AQ\/AAt-MQ\/AAuSoA\/AAcFhw\/AQ\/A1Soqw\/N2yX\" target=\"_blank\">Why Government Intervention Hinders Progress and Innovation<\/a><br \/>\n04-07-2012 &#8211; Kris Sayce <\/p>\n<p><a href=\"http:\/\/clicks.portphillippublishing.net\/t\/AQ\/AAt-MQ\/AAuSoA\/AAb-xw\/AQ\/A1Soqw\/zpyW\" target=\"_blank\">The Big Opportunities in the Oil Market That Will Lead to Profit<\/a><br \/>\n03-07-2012 &#8211; Dr. Alex Cowie <\/p>\n<p><a href=\"http:\/\/clicks.portphillippublishing.net\/t\/AQ\/AAt-MQ\/AAuSoA\/AAb-wQ\/AQ\/A1Soqw\/XWmv\" target=\"_blank\">LIBOR &#8211; The Banking Scandal That Could Cause A Riot<\/a><br \/>\n02-07-2012 &#8211; Dr. Alex Cowie<\/p>\n<div>\n<a href=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?a=idWjgH_ZdoU:GsWNjWkak_E:yIl2AUoC8zA\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?d=yIl2AUoC8zA\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?a=idWjgH_ZdoU:GsWNjWkak_E:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?i=idWjgH_ZdoU:GsWNjWkak_E:V_sGLiPBpWU\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?a=idWjgH_ZdoU:GsWNjWkak_E:gIN9vFwOqvQ\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/MoneyMorningAustralia?i=idWjgH_ZdoU:GsWNjWkak_E:gIN9vFwOqvQ\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/MoneyMorningAustralia\/~4\/idWjgH_ZdoU\" height=\"1\" width=\"1\" \/><br \/>\n<a href=\"http:\/\/feedproxy.google.com\/~r\/MoneyMorningAustralia\/~3\/idWjgH_ZdoU\/four-things-suppressing-crude-oil-prices.html\" target=\"_blank\">Four Things Suppressing Crude Oil Prices <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>By MoneyMorning.com.au The collapse of talks between Iran and the &#8220;Big 6&#8243; (the five permanent members of the UN Security Council plus Germany) should have accelerated international crude oil prices. And yes, they are higher. But the real spike hasn&#8217;t hit. Not yet. The rising crisis atmosphere in the region and the genuine possibility that &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.investmacro.com\/forex-news\/2012\/07\/10\/four-things-suppressing-crude-oil-prices\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Four Things Suppressing Crude Oil Prices&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-30736","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/30736","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=30736"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/30736\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=30736"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=30736"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=30736"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}