Crude oil prices rallied on geopolitical concerns despite downbeat market sentiment in general. NATO pledged to support Turkey as the country deployed tanks and missile defense systems on the Syrian border after the 5 people killed by Syrian shelling. The front-month contract for WTI crude oil jumped for the first time in 3 days to a 5-day high of 92.91 before settling at 92.39, up +3.43%, while the equivalent Brent crude contract soared to a 3-week high of 114.72 before ending the day at 114.50, up +2.40%. Gold, however, slipped for a third consecutive day as IMF’s downgrade of global economic forecasts and sluggish progress in the sovereign debt situation in the Eurozone weighed on prices.
As tensions between Turkey and Syria intensified, NATO stated that it has "all necessary plans in place to protect and defend Turkey if necessary" and Article 5 of the NATO treaty, deeming that an attack on one member an attack on all, would be applied in the intervention. While most of the NATO members indicated their reluctance to intervene in the Syria conflict which began in March 2011. With death of over 30K people and no signs of stabilization, the alliance might need to take a role to help resolve the crisis. Yet, this has raised concerns over oil supply and sent oil prices higher Regarding this, the IEA stressed that global oil markets are "sufficiently supplied" and "current prices are far too high for the global economic recovery".
In the Ecofin meeting held Tuesday, it’s decided that Portugal would be given an extra year to meet its deficit target and "the recommendation sets deficit targets of 5.0 % of GDP for 2012, 4.5 % of GDP for 2013 and 2.5 % of GDP for 2014". Regarding the banking union, Dutch Finance Minister Jan Kees de Jager stated that it is difficult for the EU to create a single mechanism for banking supervision (the banking union) by the deadline of January 1. Disappointedly, there’s no progress on Spain’s request for bailout.
We have a light calendar today. Japan will report its machine tool orders in September. In the US, the wholesale inventories probably added +0.4% in August, easing from a +0.7% gain a month ago. The Fed’s Beige Book business survey will also be released.
Oil and Gold Reports contributed by Oil N' Gold