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Oil & the $

A rock and a hard place

The EIA will be changing how they report oil inventories this week.

It will be interesting to see how this affects the market.

My understanding is that this doesn’t really change anything,
but it may make it look like oil inventories are 30 million
barrels smaller, which is a huge #.

There is also the OPEC meeting coming up, which has been
causing a stir and excitement.  The actual announcement is
in Nov.  Oil is rising in anticipation of an agreement to cut
production.

But oil has been fighting the tide of the dollar, which has been
trending up since 10/2.  The dollar is going up in anticipation
of the Fed raising rates.  The market thinks in Dec.

dollar-10-12-16

If either of these things go contrary to market expectations,
we could get sharp moves.

The dollar and oil are moving in the same direction, which
is not normal.

oil-dollar-comp-10-12-16

Oil started it’s up surge on 9-27.  Oil’s significant breakout
to the upside happened on 10/2, just as the dollar started up.

oil-breakout-10-12-16

The significant break up on the dollar happened on 10/5, with
a retest on 10/6 and continuation.

By that time oil had sedulously trended up, away from it’s breakout
point, which it never retested.

So, what we have are two opposing forces.  The dollar pushing down
on oil, the OPEC news a potential real force up, and the new way
of EIA reporting potentially a huge psychological push up.

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