Is it possible that the birth of French President Nicolas Sarkozy and French first lady Carla Bruni baby girl caused a late day market sell-off. Oh baby welcome to this wonderful world. At first it appeared that the beige book may have caused a late day route on stocks and commodities as traders that lack conviction more than likely found nothing that bullish to wet their bullish appetite. Yet perhaps with a market trading on the hopes and dreams of a European debt solution, a sudden departure French President to welcome his new baby girl caused speculation that a French German deal may have reached an impasse that might have far reaching implications across the globe. Not to mention the fortunes of commodity prices across the globe.

In Frankfurt the market was focused on an emergancy meeting where the daddy to be and German Chancellor Angela Merkel and other European Union leaders. Apparently France and Germany are divided on how to beef up the European Financial Stability Facility (EFSF). France want to make the EFSF a bank and allow it to use its assets as collateral to borrow more money from the European Central Bank in the future. Germany on the other hand wants to make the EFSF an bank insurance fund similar to the Federal Deposit Insurance Corporation (FDIC) in the us where it would guarantee public and private investors by covering the first 20 to 30 percent losses on their investments in state bonds.
Of course without a deal confidence in Euro bonds and Euro banks would fall causing a possible Lehman like event wondering in what direction the debt dominoes are going to fall next. If those dominoes start to fall then you know that the demand for oil is going to fall next.

The Energy Information Agency showed that demand is not that strong but it is the weak demand period of the year. Still there was a winter chill in the air as the heating oil gain ground on the RBOB gasoline. You better get those earmuffs out of your pocket! The Energy Information Agency tried to give the market a jolt by reporting that U.S. commercial crude oil inventories fell 4.7 million barrels from the previous week. Still at 332.9 million barrels, U.S. crude oil inventories are in the upper limit of the average range for this time of year. Products fell as motor gasoline inventories decreased by 3.3 million barrels last week and distillate fuel inventories decreased by 4.3 million barrels helping to inspire the long heating oil short gasoline spread a sure sign that winter will soon be upon us.

Demand is still lackluster as total commercial petroleum inventories decreased by 10.9 million barrels last week. Total products supplied over the last four-week period have averaged 18.8 million barrels per day, down by 0.9 percent compared to the similar period last year. Over the last four weeks, motor gasoline product supplied has averaged nearly 8.9 million barrels per day, down by 1.5 percent from the same period last year. Distillate fuel product supplied has averaged 4.0 million barrels per day over the last four weeks, up by 5.8 percent from the same period last year. Jet fuel product supplied is 3.7 percent higher over the last four weeks compared to the same four-week period last year.

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Phil Flynn
Research Division
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Chicago, IL 60634
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