hello and welcome back to the note
slower
a on markets today the SP here in the US
finished down for the day and we had a
negative reaction to earnings from
google and microsoft after the bell so
there's every risk that that will
continue to into the morning one thing
that's very intriguing however was that
oil continued its advance and that's
really very surprising if you remember
the headlines from the weekend now if we
take a look at this first chart this
shows you what has happened since
trading opened in asia on the sunday
night and you can see that there was an
immediate reaction to what appeared to
be very bad news if you wanted oil to go
up that the OPEC countries had failed to
agree on a production freeze that should
have you would have thought pushed the
oil price down instead as you can see
there has been a will sustained rally
upwards in the oil price now if we look
at this in a longer-term perspective you
can see yes still a long way down from
where we were about two years ago but
the oil price is now actually back up to
roughly where it was early last year and
after testing that 200-day moving
average that big measure of the
long-term trend it does appear to have
confirmed itself above that long-term
trend this bounce that we have seen in
the last few weeks adds up from trough
to a peak to almost seventy percent gain
in oil quite remarkable now what is even
more remarkable is that this has been
achieved despite the news we had from
Doha last weekend and if we now take a
look at us drewd total inventories ms
lee this number has a lag but the
inventory continues to rise very sharply
indeed in fact it's one of the highest
numbers on record you would think that
would be bad for the oil price however
the inventory is at least not rising as
fast as it can do at this time of year
and if we now take a look at production
numbers for the u.s. you can see that
they have begun to decline again this
number is produced with
Lag many people are able to assess rig
counts and so on take a guess as to
where production is moving and so there
is a strong belief in the market that
fundamentals are moving in favor of the
oil price that's this ruler that we're
going to see production steadily decline
from here and inventories come down from
here if we do then the sentiment which
is plainly changed will be confirmed
obviously things we get a little uglier
in the oil market if the fundamentals
don't confirm this very striking change
in sentiment