Every time the DJIA explodes higher, it increases the likelihood that people without work will find jobs eventually, and it suggests that some form of increased prosperity will return to the world. And it is very hard to “root” against things like that. Unfortunately, though, because exchange-traded funds and index funds have lost any interest in oil supply or demand, inventories or output, they have decided to place billion-dollar bets on oil based on equities. In years gone by, they would have seen a strong day like yesterday as the perfect time to buy Exxon or Valero – which is exactly how they should see it – for those and every other oil company. [More]

From a bear’s perspective, yesterday was a “perfect storm” of factors that all came together at once to push prices dramatically lower. It started with lower equities prices, but added in a huge rally in the US dollar, overbought pressures in oil and was capped by a much larger-than-expected build in crude oil stocks and a new 24-year high in distillate stocks. There were minor improvements in some demand components and there was a draw in gasoline stocks and a decline in refinery utilization, but the picture was overwhelmingly bearish, on the whole, yesterday. [More]

The Case-Shiller price index of home prices for May increased for the first time in three years, at the same time that the Richmond Federal Reserve manufacturing index increased, suggesting that the recession has ended. On the other side of the coin, the Conference Board showed Consumer Confidence down. The DJIA was down about 12 points, and that contributed to a decline in oil prices. Yesterday’s selloff was long overdue, and fundamental traders may want to see the start of something more, here. In terms of supply and demand, we would love to agree. This market should be much lower. [More]

The oil complex continued moving higher yesterday, although there was very little “fire” in the buying. We are now into the heart of family vacation season, and it is likely to give us quieter sessions through Labor Day. Equities traded on both sides of unchanged yesterday, finishing in light positive territory. Oil prices reached their highest point earlier in the trading day and then eased on profit-taking. Volume was on the lighter side as traders struggled to find new reasons to do the same things. Despite a number of bearish fundamental factors in this market, the traders in control only seem to have eyes and ears for the bullish factors driving prices higher right now. [More]

It has been an exciting two weeks for equities holders, because the DJIA has risen in nine of the last 10 sessions after Friday’s nearly 24-point gain. It was the eighth day higher for the spot month of crude oil on continuation charts, and the two markets’ advances are far from coincidences. While commercial oil traders threw up their arms in disgust, a seemingly endless supply of investment money - talked into “diversifying” their portfolios with a 10% holding in commodities – used the strength in equities as an excuse to buy oil and a number of other commodities through index funds. [More]

Equities soared and oil prices followed, as index funds poured money into long positions, taking no note of high inventories, poor demand or overbought pressures. The dollar was lower early in yesterday’s trading, but it rallied later in the day. But yesterday’s story was written entirely on Wall Street, at the NYSE and its sister exchanges. The story was the same. Equities rise, index fund managers expect the economy to improve, and they buy oil on the expectation that energy consumption will ultimately improve. [More]

September crude oil started its run as the expiring, front month contract by working lower yesterday. Otherwise, it was more of the same in this market. Refined products were higher yesterday, despite builds in inventories. The numbers were remarkably near estimates aggregated into survey results by the major wire services. Nonetheless, there were fresh concerns about the ability of equities to influence oil demand any time, soon. This week’s DOE report showed a draw in crude oil stocks as the result of a decline in imports, Dow Jones pointed out in its afternoon report. [More]

Yesterday's story was the same as it has been for the last few days, with one minor twist. On Monday, the best buying came from the addition of new contracts, rather than from the subtraction of existing contracts. It was not short-covering on Monday; it was fresh buying pushing prices higher. That was especially unexpected coming just a day before the August crude oil contract expiration (which was yesterday). Once again, prices advanced on this vague feeling that higher equities prices will lead to a stronger economy and ultimately to stronger oil demand. [More]

The oil complex was higher again, yesterday, as oil traders seem to be impressed by gains in equities prices. The US dollar was also lower yesterday, and that also helped push oil prices higher. But, underneath this renewed interest in equities and the dollar is a bigger question. For a while, there, oil prices were following their own fundamentals and were ignoring equities and the dollar. We cannot pinpoint a specific reason why it has happened, but last week, the interest in these external factors resurfaced. We do not know if this is a renewed influence by index funds or if we are still getting short-covering on follow-through trading from last week. [More]

Oil prices continued to rally on Friday, as traders made it three days running on renewed hope that the economy is improving. Equities were slightly higher on Friday and that helped, but oil prices seem to have been advancing on a kind of momentum higher. Neither equities nor the US dollar moved significantly enough on Friday for us to consider either of them a major factor in the move higher. And oversold pressures had been relieved earlier in the week. As a result, we are hard-pressed to find a smoking gun for Friday’s move higher. There was short-covering in the expiring August crude oil contract, but few observers saw that as the major factor in the market. [More]