All ideas need to be back tested, when we were in the middle of this discussion that economies are slowing due to oil prices hike and the argument was that as oil prices will keep going higher the economies will go into tailspin, my counter argument was that if economies will slow the demand for oil will fall, it is like the other argument that it is not possible to buy bonds if the market is going to go to dogs it is a good hedge if certain supports are to be rung but if it a structural free fall problem like Nikkei stemming from basic structural problems of economy, the inverse relationship of bond and market breaks, the hedge disappears ones the free fall starts. The US bonds represent markets and economic strength of this country, if economic health is endangered at a certain point everything become murky and may be commodities will becomes the investment objective. The return of the 30’s, I suppose.
I got a lot of flak for advising that oil price will break as demands break and slow down becomes apparent. This piece below a news item today once again demonstrate that local understanding without a global birds eye view lead to incorrect abusive decisions.
< World oil demand has proved slower than expected so far this year, allowing a contraseasonal build in petroleum stocks during March, the International Energy Agency said on Friday.Its monthly oil market report, the intergovernmental agency said it had lowered its forecast for world oil demand growth by a further 300,000 barrels a day to just 1.02 million bpd.
It was the IEA's sixth successive downward revision of demand growth from an original forecast of 1.8 million bpd.
The Paris-based agency said its reduced expectations were because of ``lower than expected first-quarter deliveries and the effect of persistently high prices in a context of slowing economic growth.''
The report sliced 160,000 bpd from the IEA's forecast for world oil demand in 2001 to 76.54 million and increased by 140,000 bpd its estimate for consumption last year.
First quarter demand growth in North America had fallen short of expectations by 210,000 bpd, the agency said.
European and Asian industrialized nations in March recorded a second successive month of lower deliveries compared to last year, it added.
``Continued high product prices helped curtail demand in emerging markets from Brazil to Thailand in the first quarter,'' the report said.
The IEA said slower demand had helped boost commercial stocks among industrialized OECD nations.
OECD inventories in March rose by 900,000 bpd to 2.55 billion barrels. The contraseasonal build saw stocks rise to 102.8 million barrels over the lean levels of a year ago.
That left the first quarter OECD stock change flat instead of a previously expected draw.
While March OECD crude stocks rose by 1.43 million bpd, petroleum products inventories fell by 830,000 bpd.
OECD gasoline stocks at end-March were 376.3 million barrels, or 12.1 million below year-ago levels.
Higher crude runs after refinery maintenance would help restore the balance between crude and product stocks, the agency said.
Despite the shortfall in gasoline stocks, refiners appeared better positioned than a year ago to deal with the U.S. gasoline season.
Refiners had made progress on component blending and greener reformulated gasoline availability, the report said. >
The summer price hikes may be avoided if crude continues to flow the way it is now and refiners are able to use the capacity to its maximum.
The markets trades and digest news one for short term that represent the daily noise and for that supports like 1255 or 1228 are so much important, the other is the 13 days moving average that James Strauss a very capable guy on SI believes in, it is the 13 days or 20 days that represent the medium term impact of the news on the market for which we look at medium trend the range we call it, the present range is 1228-1328 we are at the lower side of the range, we break 1192 we go in the lower 1080-1180 range, in between 1228 and 1192 is no mans land the indecision of the market represent that particular band. Sentiment also plays a very important role like JT pointed out yesterday as the bearish sentiment soared and his opinion was that this might lead to counter rally as market does opposite to the prevalent. Conventional wisdom. |
