Turkish warplanes shot down a Russian military aircraft as it was flying near the Syrian border today. Outraged, Vladmir Putin warned Turkey that it will suffer significant consequences for its actions. Turkey claims that it gave repeated warnings for the aircraft to leave, but the Russian aircraft did not cooperate. This headline, along with a weaker U.S. dollar and strength in prices yesterday are releasing the bulls today, as diesel is + $.0350, gas + $.0750, and crude + $1.40 as of noon E.T.
We witnessed a spike in the market yesterday after Saudi Arabia announced that it will work towards oil price stability. This implies that we may have hit the bottom of the market, considering prices have been low for an extended period of time. It isn’t a coincidence that the market is suddenly jolting upwards after Saudi Arabia came out with that statement. One thing to keep in mind is the recurring statement of a “global glut” lingering in the shadows of the top headlines. Genscape reported a build of 2.2 million barrels of crude in Cushing, OK. Here is a statement from an analyst at the Price Futures Group in Chicago late last week: "The overarching concern in this market is the growing inventory levels for crude, and that doesn't seem to be easing despite the strong refinery runs we've been having.” The Saudis’ desired outcome of their statement and the reality of the oversupplied market are in direct conflict.
On one side we have bullish news with Middle Eastern issues and Saudi Arabian statements, and on the other we have the broken record of the continued oversupply of oil and weak economic indicators, globally. Pretty soon something has to give. One last reminder: historically, prices dip after Thanksgiving on year-end inventory management.