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Phony Tranquillity?

Published Thursday, September 25th, 2014

Gulf War III has begun with the aim of dismantling “the network of death”. This time around the US has taken the lead ensuring that it has widespread support from Western and Middle Eastern allies. Britain will vote in parliament on Friday to join in. However, with or without consensus, a war is a war and there are now two going on in two of the most volatile regions in the worlds – Eastern Europe and the Middle East.

In what has to be one of the most unsettling geopolitical periods in decades, stock markets remain upbeat and oil prices moderate. Imagine describing a geopolitical background in which; Iran is continuing its nuclear programme and operating under oil sanctions; the Israeli’s and Palestinians have been trading rockets and bombs; Russia is flexing its muscles, has annexed Crimea, has eyes on Eastern Ukraine and is under economic sanction; air strikes are a daily feature of life in Iraq and Syria and Libya has two warring governments. Against such a background you would not have forecast such stock and oil market tranquillity. You have to keep asking yourself ‘is it phony?’ Will we look back at this period and say it was the most obvious stock market sell and oil market purchase ever presented?

There was no evidence of such doubts yesterday. US new home sales leapt 18% in August and a Fed official declared that the Fed should be “exceptionally patient” in any monetary tightening, so US stock markets closed higher. German business sentiment fell for the fifth consecutive month but Mario Draghi is telling anyone who will listen that he is “ready to use additional unconventional instruments” so the euro fell and European stock markets closed higher.

to read the rest of the report, please click here 

Posted by David Hufton