In the aftermath of the biggest point drop opening in the history of the stock market open, crude oil today is battling back. As European and U.S. stock markets even as china and Japan markets fall the crude market is trying to make a run higher and get out of the $30 per barrel handle danger zone. Now, overnight, China cuts its one year lending rate to 4.6% and lowered its reserve requirement--and it could take oil back into the $40's and perhaps give buyers an all clear signal.
Of course, oil will also have to deal with that old fashion supply and demand thing when they start to get a glimpses of oil inventory reports. Tonight the American Petroleum Institute will give us its version of U.S. supply, which last week was much more supportive than the Energy Information Administration's version. Bloomberg news is expecting a 2 million barrel increase in supply and it may be more than that because of the Whiting, Ind. refinery shutdown. Some Canadian crude may find its way into storage, bloating those numbers. Bloomberg is also looking at refining runs to fall to 94.6% and gas stockpiles to fall by 1 million barrels. That number, again, may be larger due to refining issues. Bloomberg is also looking for a distillates to rise.
More chatter about a possible emergency OPEC meeting. Reuters reported that a meeting may be welcomed by Iran, but the Saudis remain quiet. Former OPEC president Abdullah bin Hamad Al-Attiyah told The Telegraph that OPEC is powerless to stop the drop and would need a solid agreement from other producers to have an effect. "I don't see any light at the end of the tunnel," said Al-Attiyah. "Opec and non-Opec need to agree to support the market."
At the same time, an emergency OPEC meeting would be an admission by the Saudis that their oil war on the U.S. shale producer has been a disaster.
The New York Times says the stress is starting to show. They say that "Oil, the lifeblood of many countries that produce and sell it, appears to be rapidly turning into an ever-cheaper economic curse. A year ago, the international price per barrel of oil was about $103. By Monday, the price was about $42, roughly 6% lower than on Friday."
In a must read in the New York Times' "From Venezuela to Iraq to Russia, Oil Price Drops Raise Fears of Unrest," the article states that a trader on the floor of the New York Stock Exchange on Monday said that the S&P 500 index is off more than 11% from its high in May, indicating a so-called correction.
In oil-endowed Iraq, where an Islamic State insurgency and fractious sectarian politics are growing threats, a new source of instability erupted this month with violent protests over the government's failure to provide reliable electricity and explain what has been done with all the promised petroleum money. In Russia, a leading oil producer, consumers are now paying far more for imports, largely because of their currency's plummeting value. In Nigeria and Venezuela, which rely almost completely on oil exports, fears of unrest and economic instability are building. In Ecuador, where oil revenue has fallen by nearly half since last year, tens of thousands of demonstrators pour into the streets every week, angered by the government's economic policies."