The Energy Report - Gaza Grip

Oil prices that have been wafting in a sea of economic uncertainty rocketed on reports of an Israeli rocket attack that killed a top Hamas military leader. Fears that this could “open up the gates of hell” as Hamas has promised, sent traders looking for some upside protection. Israel says that the attack was in response to the fact that Palestinian militants have been using this area in the Gaza Strip as a base to fire rockets which they have been doing in recent days.  Oil traders feared that the conflict could draw in others, such as Egypt, and could put at risk ship traffic along the Suez canal. The UN Security Council held an emergency meeting at the request of Egypt and Morocco but it was unclear whether it will calm down the situation.

Yet, after an initial spike, the oil prices settled down but with the focus turning away from economic doom back to geo-political turmoil the market has at least on reason to rally increasing the odds that we may be closer to a bottom. Products spike on a Bloomberg Report that Motiva had a power failure at Convent and it triggered a unit outage. That came out around the same time as the Gaza story broke.  Bloomberg also reported TransCanada Corp. has declared a force majeure for oil shipments on the Keystone pipeline because of power restrictions, according to a person with knowledge of the situation.  

Germany, France and Italy had better than expected GDP figures which could also help oil from a risk on perspective. RTT news reported that the euro climbed against other major currencies as better-than-expected gross domestic product data from Germany, France and Italy prompted investors to seek the European currency. The latest figures from the statistical office Insee revealed that the French economy expanded 0.2 percent quarter-on-quarters in the third quarter, compared to economists’ forecasts for a zero growth.  The German economy expanded for the third straight quarter, with GDP up 0.2 percent sequentially versus economists forecast for a 0.1 percent expansion. In Italy, gross domestic product decreased 0.2 percent quarter-on-quarter in the third quarter, slower than the 0.5 percent fall economists expected. In the euro area, gross domestic product slipped to 0.1 percent in the third quarter from a decline of 0.2 percent a quarter ago.  Spain should urgently seek an emergency aid, European Central Bank Governing Council member Luc Coene was quoted as saying by Belgian daily De Standaard today.  Coene, who also heads Belgium's central bank, expressed concern over the Spanish economy as the country's 10-year bond yields have climbed back to around 6 percent in the recent days. Erasing early Asian session's low, the euro advanced to 1.2774 against the greenback from yesterday's close of 1.2736. If the euro gains further, it may break 1.28 level. Against the pound, the euro firmed to more than a 2-week high of 0.8067 before paring gains slightly. The euro-pound pair closed Wednesday's deals at 0.8041. U.K. retail sales volume declined 0.8 percent month-on-month in October, reversing last month's 0.5 percent rise, the Office for National Statistics reported today. It was forecast to fall 0.1 percent in October.  Sales excluding automotive fuel were down 0.7 percent after increasing 0.5 percent a month ago.

The American Petroleum Institute report that was released a day later due to the holiday was also supportive. Crude stocks increased by a less than expected 1.3 million barrels. Gas stocks were also supportive as they fell by 103,000 barrels and distillate up only 184,000 barrels. Today we get both the petroleum and natural gas reports from the Energy Information Administration.

What happens if you can’t twist again like you did last summer? You just buy bonds outright. The Fed and twisted it as far as they can go and are out of short end paper so now to get through the Cliff and the Greek drama it is  time to buy the long end straight up! Fed minutes by minute! No wonder the long end has been on fire! 

Bloomberg News Reported that gold declined after a report showed that global demand slowed in the third quarter, and as the dollar held near the highest level in two months, curbing interest in alternative investments. Platinum slumped the most in a week after a two-month strike in South Africa ended. Global gold demand dropped 11 percent to 1,084.6 tons in the third quarter from a record a year earlier as slowing growth in China cut investment and jewelry purchases, the World Gold Council said in a report today. President Barack Obama is negotiating to reach a deficit-reduction deal with Congress to avert $607 billion in automatic tax increases and spending cuts, the so-called fiscal cliff. The dollar was little changed against a six-currency basket including the euro and yen and is up 1.4 percent this month. Gold is still 10 percent higher this year as stimulus by central banks around the world boosted demand for bullion as a store of value.

Billionaire investors George Soros and Louis Moore Bacon increased their stakes in exchange-traded products backed by gold in the third quarter, filings showed yesterday. Total assets held in ETPs, which reached a record 2,596.106 metric tons on Nov. 8, were at 2,595.39 tons yesterday.  Platinum for immediate delivery fell 0.8 percent to $1,573.75 an ounce and palladium fell 0.1 percent $636.50 an ounce. Anglo American Platinum Ltd. (AMS), producer of about 40 percent of global output of the metal, said a two-month strike in South Africa ended after it agreed to increase pay. Silver gained as much as 0.2 percent to $32.74 an ounce and was at $32.6825 recently as data compiled by Bloomberg showed ETP holdings climbed to a record 18,770.97 tons yesterday. The “Power to Prosper” can only be yours if you choose to turn into the “Fox Business Network”! Don’t forget to sign up for my presentation today! It is called “The President’s Secret Weapon”! I will not tell you what it is about but just let’s say that the “International Energy Agency” kind of stole my thunder.

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Also sign up for my daily trade levels and get your account open. Call for INFO today! (888-264-5665) or Email pflynn@pricegroup.com.  Here is the link to apply online: https://newaccount.admis.com/?office=269 Here is the PDF version:  http://www.pricegroup.com/ADMIS/ADMIS%20Account%20Application.pdf

Phil Flynn

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