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The EIA reported today that inventories of crude oil, gasoline and distillates showed a bigger-than-expected increase last week, which drove oil down 12% at the time of this writing. That’s the largest drop in seven years. One of the factors driving the build in inventories is the contango in the crude futures, where the further months are at a higher price than the near months. Today, Dec 09 futures are about 25% higher than Feb 09 futures. That gives oil companies reason to stockpile supplies if they have the storage capacity. The fighting between Israel and Hamas and Russia’s “contract dispute” with Ukraine were not enough bullish factors to offset the continued nervousness about the economy and the inventory build.
A report by ADP Employer Services said that US employers shed 693K jobs in December, more than expected. That, plus a revenue warning by Intel (INTC), drove US markets lower. The S&P 500 was down over 3% at the time of this writing, and that is pretty dramatic, but you have to keep it in perspective. The market has given back the gains it made since the end of 2008. In fact, the magnitude of this drop is less than the magnitude of the rally on January 2. The market’s going nowhere, but it’s giving us a heck of a ride.
Tom Preston
thinkorswim, Inc.
Member FINRA/SIPC/NFA
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