Crude Prices Soar And Dominate The Conversation

As of midafternoon, West Texas Intermediate is up around 4.5% with Brent North Sea Crude following closely behind.

This is because reports are saying there is an alleged deal between Saudi Arabia and Russia in the run up to Doha this weekend. Yet, Iran has already said it will attend the meeting though it will not talk cuts or freezes in production.

We give a shrug of the shoulders. Canada and the United States will not attend and they will not touch the talk of cuts with a ten-foot pole, since the drastically lower prices have already cut North American output drastically. (Mexico will attend as an observer.)

To put the cherry on op of the whipped cream on top of the sundae, we think Iran will actually expand production once the infrastructure is in place. That is to say, within a six to eight-month timeframe.

Asian markets did not have enough time to fully take advantage of the oil bounce, but the Nikkei got a boost from the drop in the yen against the U.S. dollar and other world currencies. The Nikkei was up over 1.00% on the day. Shanghai fell one third of a percentage point.

European indexes grew stronger as oil gained momentum. The DAX, FTSE and CAC were all up moderately to robustly.

In New York, the S&P, the broadest-based measure, was up over 1.00% at 3:30PM, as was the Dow. They gained on very strong upticks in energy company stock prices.

The NASDAQ was not as strong as it tried to recover from a buy-to-neutral recommendation on Starbucks, which tumbled 3.00% at one point. Starbucks cast a pall over the day’s trading on NASDAQ.

The weaker yen also was of help for the Dow and S&P, giving a nice nudge to financials, which like the strong dollar. The yen has been overbought, the dollar oversold and we are bound to see some rebalancing before longer-term trends resurface. (The dollar is off recent 7-1/2 month lows.

Gold took a breather from its upward-moving spiral, but it is truly a breather and once the glow of higher oil prices dims, we look for gold to star ascending again.

Silver remained very bullish, up 1.75% as the close comes into sight. Platinum was up over 1.00% but palladium failed to follow up on yesterday’s moves, rising only 0.18% on the session.

Overall, it was a risk-off day because of the oil spike. Ten-year U.S. Treasury yields rose and face prices fell after a weak auction of the 3-years.

Let’s see what happens tomorrow with oil and equities to determine how the sentiment toward gold resolves itself. We’re thinking there will be profit taking on oil based on the dashing of the hopes raised by the Saudi-Russian rumor.

Wishing you as always, good trading,