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This past week turned out to be more than anyone could expect, major earthquakes and tsunamis, unrest in the Middle East, falling consumer sentiment, plunging oil prices and the impending FOMC meeting...still the markets remained resilient! First and foremost, the devastation to Japan was and remains unbelievable...our prayers and thoughts go out to that nation. There's no doubt that the economic disruption will be felt globally, Japan is the 3rd largest economy after the U.S. & China. There's already talk of Japan's repatriation, which will place pressure on Canada. read
Back in the Middle East- The Saudi Day of Rage turned out to be a non-event and nobody showed up at either rally point in Riyadh except for riot-clad policemen. Prince Alwaleed bin Talal al Saud, nephew to the king and chairman of Kingdom Holding, said it should be renamed from Day of Rage to Day of Allegiance since no protestors in Riyadh was seen to be a vote of confidence for the king's recent $35 billion stimulus program.(see Friday's blog for Prince's CNBC video)
In Libya, Muammar Qaddafi’s better-equipped forces drove back rebel fighters as the Arab League urged the United Nations to impose a no-fly zone over Libya to stop the violence. read
Thus, several factors contributed to the pullback in oi's price this week. With the diminishing protest in Saudi Arabia and the expected drop in demand by Japan. With five refineries shutdown, some for an extended period to make repairs, the demand for oil for Japan is going to drop sharply. Japan is the third largest importer of crude in the world at 4.4 million barrels per day. Also, expect some further selling as a possibility of a No-Fly Zone over Libya happening soon. Friday, Itz also posted the Commitment of Traders weekly NYMEX crude oil numbers. The specs are at the larget long position in years, should they hit the sell switch, WTI could drop hard...back into the lower end of the channel in the chart below. ITZ issued a BUY on Proshares UltraShort DJ-AIG Crude Oil @ $43.60.
This coming week will be pivotal, as the FOMC votes...the expectations for a statement change are rampant and if the Fed is NOT going to change the statement negatively I believe they need to make a positive change to rally the markets. Will we see an extended QE2 or a possible QE3? Stay tuned!
ITZ VIDEOS OF THE WEEK
A look at how a no-fly zone will impact oil prices, with John Kilduff, Again Capital partner.
Mark Fisher, MBF Clearing Corporation CEO, discusses whether oil's rise on Mideast tensions is now over, as well as the impact of rising demand in China. The NYMEX trader reveals how he is playing oil now.
Assessing Japan's earthquake's impact on oil, which has fallen under $100/barrel, with John Kilduff, Again Capital, and Daniel Dicker, independent oil trader.