Energy – lower in a soft quiet holiday trade – Iran threatens Hormuz closure as EU pushes for more sanctions – inventories delayed a day – warm forecasts. Again we have a quiet low volume holiday market trading slightly lower. Analysts are concerned about the lower appetite for risk as economic numbers are mixed globally. The Italian bond auction was well received with lower yields should support EU risk. Japan indicates lower household spending and weaker retail sales. U.S. consumer confidence was better than anticipated as Christmas shoppers must be a better mood. U.S. equities indicate a slightly better opening with possible support to the energy market. Warm temperatures continue to warm North America and across Europe and Asian. Geopolitical concerns, specifically Iran and the Strait of Hormuz closure have eased today. Iran jeopardizes the loss of Chinese and Russian support if they would close the Strait. Yet, the EU presses ahead with plans to impose new sanctions on Iran. The funeral for North Korean leader Kim Jong Il occurred today leads into concerns for the future leadership and actions of North Korea. Syrian release of 755 prisoners adds to the information that the Arab monitors will discover. Inventories are delayed a day, but early indications are we could have further drawdown’s of crude oil as Gulf tank storage is drawn down for yearend advantages.
We have to look at another indicator in the WTI – Brent crude oil spread. This spread have moved to $7.00 level as if continues to narrow. The trade have been selling Brent and buying WTI crude oil and they have been correct. If Iran would shut the Strait of Hormuz in retaliation of further sanctions, Brent crude oil should spike higher. The trade is telling us this will not happen as Iran have threatened this action a thousand times.
