Greece approved the latest deal to clear the road for its next tranche of bailout funds. The Greek Parliament approved the deal as riots in downtown Athens engulfed the streets. A large majority of the Parliament approved the austerity measures needed to convince the Troika that they were serious and thus eligible for the bailout funds. In essence this was a vote by the Parliament (symbolically) to stay in the euro region and avoid a potentially disorderly default. Now Greece has to actually implement the austere budget in the midst of significant displeasure and rioting by the general public in Athens. The situation in Greece is far from over even though they are now scheduled to receive the bailout funds as there economy is faltering and with even more austerity measures it is going to contract even further.

The outcome of the Greek vote is now working to move the EU and all of its sovereign debt issues to the background opening the door for most risk asset markets to trade around their individual price drivers. So far in both the Asian trading session as well as the European session (so far) most equity and commodity markets are in positive territory compared to Friday's... close mostly all based on moving Greece out of the media headlines.

Oil prices recovered most all of Friday's losses on a combination of the Greek deal as well as the evolving geopolitical situation in the Middle East...in particular Iran. It appears that the sanctions are starting to impact oil production and exports from Iran. However, it does not seem to be changing Iran's view as it plans to make a major announcement (their words) early this week regarding its latest achievements in the nuclear area. As Greece moves to the background geopolitics are moving to the foreground and acting as one of the main price drivers for the oil complex.

Today the Chinese Premier said that China needs to start fine tuning its economic policies this quarter...possibly the first signal that the government is ready to embark on an aggressive accommodative monetary policy. The macroeconomic data out of China so far this year has indicated that the main economic growth engine of the world is slowly continuing to lose its momentum and some form of stimulus is likely needed. China has already reduced Bank reserve ratio requirements once with short term interest rates likely now on the agenda. Any form of easing will be a positive for oil and the broader commodity complex but with inflation also rising in January the government is not likely to get too aggressive in the short term until they are convinced that inflation is not going to be an issue. China is one of the main areas that will have a major impact on the global economy going forward.

The equity markets ended the week mixed even as the US dollar was modestly stronger even as the euro gained ground on the week. As the situation in Europe unfolded and by the time the end of the week arrived most all risk asset markets (not so much on the equity front) were able to end the week in positive territory but well off of the highs of the week. Last week was mostly about watching and waiting for the Greek deal to get approved (which it did over the weekend)... while the war of words between the west and Iran continued. The action and volatility last week was in all of the oil and commodity markets as well as the global equity markets. Last week was all about market players acting around the cloud of uncertainty that seemed to marginally shrink for some risk asset markets. Equity bourses were mixed even as uncertainty started to decrease by the end of the week. Precious metals decreased modestly as the US dollar was marginally higher on the week as cash moved into a variety of risk asset markets but out of gold. Over the last week the oil complex was higher with WTI modestly higher and Brent outgaining WTI as the geopolitical risk premium mostly impacted Brent. The Mar WTI contract increased about 0.85% or $0.83/bbl. The Mar Brent contract ended the week with a modest gain of 2.38% or $2.73/bbl. The Mar Brent/WTI spread moved higher and continued to trade well above the trading range it has been in for the last month or so as tensions in the Middle East and Nigeria raised the risk of an interruption in supply with the market placing that risk premium almost solely in Brent and not WTI.

On the distillate fuel front the Nymex HO contract increased even as distillate fuel inventories increased modestly with US distillate fuel exports flat on the week. The spot Nymex HO contract increased by 2.17% or $0.0677/gal. Gasoline prices increased on the week even as gasoline stocks increased strongly (for the third week in a row) and much more that the expectations. The spot Nymex gasoline price increased by 2.08% or $0.0605/gal this past week.

On the week Nat Gas futures were relatively steady even as the winter has still not arrived in most regions of the US. Nat Gas futures declined by only 0.88% or $0.022/mmbtu after falling strongly the previous week. In the midst of an increased level of volatility in most risk asset markets Nat Gas futures have been trading in a relatively tight trading range since yesterday's very bearish weekly inventory report or about the most bearish inventory report since the winter heating season began. Seemingly orchestrated comments by Chesapeake officials about the possibility of cutting additional production (over and above what they have cut so far) seemed to be enough to serve notice to the short sellers that they may begin the process of supporting the price of Nat Gas. It certainly seems like a page out of the playbook of OPEC who for years tried to jawbone the market higher (mostly unsuccessfully) only to recognize that talk only does not do the trick it must be followed by significant cuts as we last saw when oil prices were collapsing back in the fourth quarter of 2008. So far talk of cuts has been mostly talk with actual announced cuts amounting to less than 1% of total production so far. That said it has been enough (so far) to prevent a major sell-off after yesterday's extremely bearish fundamental snapshot...but for how long!

On the financial front equity markets around the world ended mixed and breaking the five week winning streak. Fear of contagion coming from the southern EU member countries... is still a huge concern in the financial markets but did ease a tad as the week progressed (however the sentiment is changing a bit as a Greek deal is now in place). Global equity values decreased as shown in the EMI Global Equity Index table below. The EMI Index lost 1.1% on the week. Over the last week the Index lost ground even as the euro increased modestly as did the US dollar. Last week the global equity markets were a neutral price driver for oil and most commodity prices.

WTI is still trading above its intermediate support level even with the downside correction last week and recovery so far overnight. Brent has also breached its resistance level with a path that could possibly take it to the $118/bbl level. But as with WTI Brent was also in the midst of a modest downward correction pattern. I am keeping my view at cautiously bullish but raising the caution flag that the market is becoming is still susceptible to a modest round of profit taking selling in the short term...which hit the complex last week. I am still keeping my view at neutral and bias at bearish as once again there is not much supportive indications that Nat Gas is likely to embark on a major short covering rally anytime soon. The surplus is still building in inventory versus both last year and the five year average is going to get harder and harder to work off even it gets cold over a major portion of the US and as such for the medium to longer term I am still very skeptical as to whether NG will be able to muster a sustained upside rally over and above a short covering rally.

Currently markets are mostly higher as shown in the following table.

Best regards, Dominick A. Chirichella dchirichella@mailaec.com Follow my intraday comments on Twitter @dacenergy.