Strategic Oil Reserve Possible Coordinated Global Release

Category: Forex News
Sunday 01-04-2012

More talk that the US might release oil from their reserves, in conjunction with a report from the US Energy Department showing crude inventories at a 20-month high, aided a pretty decent drop in crude prices overnight. WTI was off 1.7 per cent ($105.5) and Brent fell 1.1 per cent ($124.2) after the French Industry Minister said the US was actively considering it. The US stated, as they have in the past, that no decision had been reached. As I’ve mentioned previously though, there is a strategy at play here and a coordinated one at that. Comments from the UK the US, Saudi Arabia and now France have all been directed at talking prices down. More generally, there was a turn in sentiment also hitting commodities and prices across the board were weaker. Gold for instance was down $17 to $1662, silver fell 2.4 per cent and copper was 1.3 per cent lower. A little bit of US dollar buying probably helped with that, but we’re not talking big moves. So the US dollar index was up 0.4 per cent at the higher and has come off since then (flattish from 1630 AEDT). The Australian dollar for its part got caught up in rising risk aversion, falling 56 pips from 1630 to be at 1.0395 as I write. Euro in contrast ended only a tad lower (10 pips to 1.3323), while sterling was off 60 pips to 1.5895 and yen was little changed at 82.83. Lower commodity prices smacked US equities and at the low, the S&P500 was down 1.1 per cent led by energy and basic materials. A bid developed into the close and in the end we saw the index off 0.5 per cent (1405) with most sectors off, but basic materials, energy and industrial hardest hit. Financials were about the only sector in the black. Otherwise the Dow fell 71 points to 13126, the Nasdaq was 0.5 per cent lower (2104), while the SPI was off 0.4 per cent (4336). I have to confess to being a bit surprised by the extent of those moves given the lift in US durable goods orders. They were weaker than expected (3 per cent), instead rising 2.2 per cent, while core orders rose 1.2 per cent versus a forecast for 1.5 per cent. Core shipments in contrast were stronger than expected (1.4 per cent versus 0.9 per cent) – so it wasn’t a bad report and annually orders are over 17 per cent higher.