In a shortened and light volume trading week, and with all eyes focused on the fiscal cliff negotiations, oil prices were little changed on Monday, but surged on Wednesday on the news that President Obama was returning from vacation to negotiate with the Congress. A precipitous drop in the dollar vs. the euro and concerns about the Middle East also contributed to the 2.7 percent jump in NY oil prices. At the close NY futures had gained $2.37 to close at $90.88, the highest close in two months and London gained. Brent closed at $111.07, the highest close this month. NY gasoline futures were up about 5 cents a gallon on Wednesday. Because of the tight gasoline and heating oil inventories in the US some analysts say we could see a further advance in oil prices before the end of the year.
Because of the two-day federal holiday the weekly stocks report will be delayed until Friday morning this week.
A variety of developments in the Middle East has the markets worried. The Syrian situation looks set to decay into an indefinite period of chaos in the wake of the Assad’s departure. Israel says there is no evidence that the government has used poison gas against rebel forces as some rebel sources are saying. A terrorist cell was uncovered in the UAE composed of Saudi and UAE citizens that was preparing for attacks in the region. Iran is conducting a naval exercise in the Straits of Hormouz and at the same time is complaining mightily about a newly formed Gulf Cooperation Council joint military coordination group that is aimed at the Iranians.
Iraq’s Kurds have stopped exporting oil via the northern pipeline as the dispute with Baghdad over payments for the oil continues. Political tension in Baghdad continues to grow in the wake of Shiite Prime Minister al-Maliki’s arrest of a number of his Sunni Finance Minister’s bodyguards. Thousands of Sunnis have taken to the streets to protest the arrests. The Sunnis say the protests will continue until the Shiites start treating them fairly – which could be a long time. The dispute with the Kurds has already slowed Iraqi oil exports and more trouble with the Sunnis is bound to do the same.
Caracas says that President Chavez is recovering from his fourth cancer operation and is doing better. Many outside observers are skeptical that Chavez will ever be in condition to serve as President. The inauguration for the next term is coming up on January 10th, but Caracas is saying that Chavez will become the next President even if he can’t make the swearing in ceremony.
Beijing has opened the world’s longest high-speed rail line that allows travelers to go from Beijing to Guangzhou, some 1400 miles in 8 hours while traveling at 186 mph.