Imagine my surprise this morning when the market gapped with a bang to the upside. After yesterday’s undulating market ride ended in a slight plus, and with all of the contradictory news out of Europe this morning, I figured today would a typical strong reversal, a down day. Hmmm … When this stuff happens, I think something furtive is going on, something is in the works that none of us out here in everyday land know about. Let’s hope I am onto something here …
Last June, I wrote about Michael Dunn, one of three democrats on the five-member Commodity Futures Trading Commission (CFTC) in charge of implementing the new Dodd-Frank rules covering excessive speculation. I wrote that since January, he had sided with Republicans to keep the new rules off the books. Well, Dunn’s term expired in June and President Obama appointed a new Democrat to replace him, one committed to implementing the new rules. I said then that this would help bring down the high price of oil, which then was well above $100 for both WTI and Brent crude. Interestingly and ironically, the price of oil came way down, but not because of Dunn’s replacement. The U.S. Senate has yet to confirm him, so Dunn has continued to serve. Well, lo and behold, even though Dunn expressed strong reservations when doing so, he changed his vote and the new rules are going into effect. Big, big pressure, no doubt.
After four years of fighting between government officials and commodity trading agencies of various stripes, the Commodity Futures Trading Commission (CFTC) voted 3-2 to impose limits on the number of futures and swap contracts a trader can hold. The new restrictions are intended to reduce speculation and cap price spikes in oil, gold, and grain prices, among other commodities.
Will this affect oil prices the way I thought it would back in June Probably not, as the new rules will phase in through 2013 and because so much time has elapsed, lobbyists have had time to get the rules diluted. The good news is oil prices are down anyway (not to where they should be) and Libya is moving into a new phase, which could bring another 1.5 million barrels of light, sweet crude into the market over the next 3-6 months. The bad news is that between now and 2013, oil will probably spike again (despite Libya), especially if Jeff Immelt is right about 2012.
General Electric Co reported an 18 percent rise in quarterly profit that met Wall Street’s expectations, as revenue rose across its big energy, aviation, healthcare, and transportation arms. The largest U.S. conglomerate said it expects to increase operating earnings per share at a double-digit percentage rate next year, despite what Chief Executive Jeff Immelt described as a “volatile global economy.”
The big question on my mind is if the CFTC does not get more control over excessive speculation soon enough, and Libya’s impact on the oil market is minimal because it cannot deliver production or OPEC lowers output, will oil spike to a point that severely hampers or kills the already fragile global economic growth. Oh, I so wish economic/market realities were simpler. Then again, what fun would that be
Trade in the day – Invest in your life …
