There is no peace in the Middle East. Conflict between Israeli and Gaza continued for its 7th day. Meanwhile Russian gas monopoly Gazprom has cut off gas shipments to Ukraine since Thursday in a dispute over payments, and Ukraine warned that European customers could see serious natural gas disruptions in about two weeks.
A strong performance in U.S. equity markets also boosted bullish sentiment across the complex. The DJIA broke through the 9000 mark for the first time in 3 weeks. Israel’s ground offensive in Gaza and a dispute between Ukraine and Russia over gas imports pushed oil prices above $48 a barrel Monday, but some analysts say there’s more than just unrest in the Middle East behind the rally. The belief is that the gloom and doom of the economy is leaving the market. I don’t think I would be telling the auto industry that since GM, Ford, Honda and Toyota all reported 30% or better decline in sales for December.
Adding support, the Department of Energy said it would resume filling the nation’s Strategic Petroleum Reserve, following the expiration Wednesday of a suspension. The Department plans to fill the reserve this year to its 727 million bbl capacity, which would provide about 70 days of net import protection.
For those of you who just got done reading our monthly newsletter, Oil prices have risen from around $35 a barrel since Israel launched its Gaza offensive Dec. 27, heightening fears for crude supplies from the Middle East. Our article was written before January 1st. We still believe if and it’s a big IF, things can calm down over there we are looking at $40 a barrel crude or less until the next OPEC production cuts or an economy that comes back from the dead and races to 11,000 points quickly.
As we have always said, we do an excellent job managing how our clients buy fuel, negotiating prices, auditing invoices, consolidating back office paper flow, etc. If we knew what the market was going to do from day to day we would have been able to retire a long time ago. Now is not the worst time to think about capping your fuel cost with fuel insurance. You might not be buying it at rock bottom but who knows where the bottom is or if we hit it already.