Expiring front-month October WTI crude oil traded more than $25 higher yesterday as shorts were forced to square-up positions on the last trading day of the month. A weakening dollar exacerbated the shift into commodities as investors begin to question whether the government's $700B bailout will continue to see delays resulting from partisan red tape. Even if the rescue plan is implemented quickly, the Federal Reserve will be forced to handle long-term inflation risks directly resulting from the bailout.
Non-Opec producer Mexico continues to disappoint, reporting reduced oil exports for August. Meanwhile, defacto Opec leader Saudi Arabia has in fact begun to cut back on production. This at the same time China reports an 11.5% increase in oil imports over August of last year. The supply-side problems have clearly not gone away and it looks like world-wide energy demand persists throughout the financial crisis.
Singapore, 08:00
Monday, September 22, 2008
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