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The Price of Fear
Fear is back in the market as oil put in a bit of what you might call a “WikiLeaks” premium. Oh sure, there were other things to be fearful about but to understate the importance of the Wiki Leaks revelations about Korea and the Middle East means that you really don’t understand how risk premium works. Oil traders constantly try to assess the risk to supply and add a fear premium or an insurance rate premium that reflects the fluidity of supply. With the revelations such as King Abdullah of Saudi Arabia urging U.S. attacks against Iran or that North Korea helped Iran with the development of a nuclear weapon, it is obvious that the market has to face up to some of the realities of risk that it had tried to ignore. Yet fear was on display everywhere you looked. We saw markets from bonds to stocks and commodities try to reassess their comfort zone in a day that led to wide trading ranges. Of course the market still fears that Euro zone could collapse and war could break out in the Korean peninsula and the revelations from the leaked memos only adds to our angst. There is no doubt that the wikileaks added to the price of oil. The Energy Information Agency released some statistics and David Bird the energy statistics analyst for Dow Jones pointed out some fascinating facts. For example did you know that the US exported the most gasoline since 1947? Well they did! In fact exports of finished gasoline averaged 113,000 barrels per day in the first 9 months of 2010. That's the highest volume since 1947 according to Dow Jones. The U.S. has been a net exporter of gasoline in 14 of the past 15 months and in 16 of the past 23 months, beginning in Nov '08. Prior to that, the U.S. was a net importer of gasoline since 1961. Mexico accounted for 62% of US gasoline exports, which totaled 226,000 barrels per day in Sep. Gasoline imports were 130,000 barrels per day in the month, with Canada the biggest supplier, accounting for 29% of the total. The EIA also reported that US crude oil stocks rose by 1.3% to 360.115 million barrels a day, the highest end-Sep level since 1980. Stocks were 25.1 million, or 7.5%, above the year-ago level, the biggest surplus in any month since Sep 2009, when stocks were 10.2% above a year ago. End-Sep stocks were 42.3 million barrels, or 13.3%, above the 5-year average. The rise came as refiners cut crude runs by 369,000 barrels a day from Aug levels, to 14.741 million barrels per day. That was the lowest since March, but the most in Sep since '07 and 31,000 b/d above a year ago. US crude output rose 1.1% in Sep from Aug to 5.567 mln b/d, the most since May '05 and the highest level in Sep since '03. Crude imports in Sep fell 3.4%, or 318,000 b/d from Aug and were 1% below a year ago. Imports were the lowest in Sep since '08, when hurricanes disrupted flows. Make sure you are getting the latest in business news by checking me out every day on the Fox Business Network! Also make sure you are getting my daily buy and sell points for all of the different markets! Just call me at 800-935-6487 or email me at pflynn@pfgbest.com. |
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