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November 12, 2013

November 12, 2013

 

Macroeconomic Factors

  •  Q3 GDP was significantly stronger than expected on the initial read. October’s employment was much stronger than expected, and prior months were revised higher.
  •  The only real negative is the lower level of consumer confidence, perhaps reflecting reaction to events in Washington.
  • Europe has generally strengthened, and the ECB seems committed to continuing the trend. China’s PMI reports suggest that the “hard landing” has been averted – a picture of stability, but not yet a resumption of brisk growth.
  •  The bond market agrees with this interpretation, as the benchmark ten-year Treasury note yield has moved back to the 2.8% range.

Potential Risks

The price of gas at the pump has fallen significantly in the past month. This reflects then decline in the price of oil. Business Insider reports that oil fell to a 4-month low in the past week alone, citing a number of factors:

“U.S. refineries are undergoing fall maintenance, which has crimped demand for crude.

‘We are now at the nadir of the fall refinery maintenance season. Within the next couple of weeks demand will return to the market. To this effect, the return of refinery demand could help support values at current levels,’ Schork Report analysts said in an energy markets commentary.

December’s possible reduction or ‘tapering’ of the financial stimulus provided to the economy through bond purchases by the U.S. Federal Reserve also weighed on oil prices. Commodities like oil, as well as many stocks, have benefited from the Fed’s stimulus program, attracting investors looking for higher returns than the low interest rates offered by bonds.”

Pricing

The RBOB futures chart corroborates other reports testifying that oil prices have dropped drastically in the last month. Whereas the futures for the month of October were virtually the same as they were in July, the curve for November is at the lowest point since earlier in the spring.

 

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Filed under:Eyes on Energy | by Fuel Expert @ 1:25 pm |