As I wrote yesterday Commodities are going crazy and so is the Federal Reserve adding that final bullish element to an already bullish market place. The Fed Minutes gave credence to what that charts were already signaling and that was that QE 3d may be right around the corner.

The Minutes suggested that within the walls of the Fed that the opposition to a radical move may be softening as it said that many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery. In other words it seems that even the most hawkish members of the Fed realize that with the fiscal cliff just up ahead and a contentious political environment it will be up to the Fed to try to print our way out of the abyss.

Those sentiments confirmed to gold and silver trader that it was time to explode on the upside and oil to break through critical resistance. Oil imports plunged falling dramatically catching traders by surprise and strong refinery runs led to a big drop in crude supply. The Energy Information Administration reported that U.S. commercial crude oil inventories decreased by 5.4 million barrels.

Of course when it comes to imports in the big picture they may continue to fall. Bloomberg News reports that boom in oil production from the shale formations of North Dakota and Texas has the U.S. on a course to cut its reliance on imported crude oil to about 42 percent this year, the lowest level in two decades. Dependence on crude purchased from foreign countries is on a pace to decline from last year, Adam Sieminski, the head of the U.S. Energy Information Administration, said during a Bloomberg Government lunch yesterday in Washington. Higher oil prices and an increased use of a drilling technique known as hydraulic fracturing has producers including Continental Resources Inc., Marathon Oil Corp. and Hess Corp. boosting production from oil-rich geologic formations. Hydraulic fracturing, or fracking, involves pumping millions of gallons of water into the ground to free oil and natural gas and has been widely used in shale-rock formations such as the Bakken of North Dakota and Eagle Ford in Texas.

The EIA reported that that motor gasoline inventories hit by refining issues and other problems decreased by 1.0 million barrels last week and are in the lower half of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories increased by 1.0 million barrels last week and are below the lower limit of the average range for this time of year. Propane/propylene inventories increased by 1.9 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories decreased by 3.0 million barrels last week.

Of course the other issues this week is whether or not soon to be Hurricane Isaac and a tropical depression number 10 to be named later will head into the Gulf of Mexico. We already know that imports will be slowed again but with more domestic production the market may not be as worried as it normally would be. U.S. crude oil imports averaged 8.2 million barrels per day last week, down by 510.

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Phil Flynn