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Old 08-13-2014, 07:18 AM  
petegz28 petegz28 is offline
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The price of oil and the disconnect of Wall St.

I have read a lot of articles as of late crying about lower oil prices being bad for stocks and the economy. Well, perhaps slightly for stocks but let me as a question....

WHEN IN THE **** IS CHEAPER GAS BAD FOR THE AVERAGE CONSUMER????
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Could weaker oil be signaling doom for stocks?



The price of Brent crude slipped to a 13-month low on Wednesday, pushed lower by reports of oversupply in the markets. However, some market watchers believe that this softness could be signaling something more sinister in the global economy, with a risk that the weakness could spread to other assets.

"At the end of the day it's all about demand," Michael Hewson, the chief market analyst at brokerage firm CMC Markets told CNBC via telephone. The oil price is simply a leading indicator for demand across the globe, according to Hewson, who predicts the price has more downside risk than upside, barring any unexpected geopolitical event.

He agrees that current global growth forecasts may be too optimistic and depressed demand in Europe and China, along with the anticipated normalization of interest rates in the U.S. and the U.K., could be about to bring investors back down to earth.

Read MoreWeak Chinese data show patchy economic recovery

"I think the (growth forecasts) have been over egging the pudding," he said, adding that he has felt the market has been too upbeat for most of 2014. "Far be it from me to get in front of a runaway train...but I think that train is a bit crowded," he said.


An oil-well site outside Williston, N.D.
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An oil-well site outside Williston, N.D.

The price of Brent crude slipped to a 13-month low on Wednesday, pushed lower by reports of oversupply in the markets. However, some market watchers believe that this softness could be signaling something more sinister in the global economy, with a risk that the weakness could spread to other assets.

"At the end of the day it's all about demand," Michael Hewson, the chief market analyst at brokerage firm CMC Markets told CNBC via telephone. The oil price is simply a leading indicator for demand across the globe, according to Hewson, who predicts the price has more downside risk than upside, barring any unexpected geopolitical event.

He agrees that current global growth forecasts may be too optimistic and depressed demand in Europe and China, along with the anticipated normalization of interest rates in the U.S. and the U.K., could be about to bring investors back down to earth.

Read MoreWeak Chinese data show patchy economic recovery

"I think the (growth forecasts) have been over egging the pudding," he said, adding that he has felt the market has been too upbeat for most of 2014. "Far be it from me to get in front of a runaway train...but I think that train is a bit crowded," he said.

The price of Brent and WTI has been relatively stable for the last two years as the expansive monetary policy by central banks has coincided with a bull run in the equities market. The commodity saw a brief spike in June with fears over an Islamist militant group taking over large parts of northern Iraq.

Read MoreGeopolitics posing 'uneasy comfort' for oil markets

But markets have slipped since that price move, with Brent crude sliding to $102.45 a barrel on Wednesday to trade near its lowest level since June 2013. U.S. crude fell to $97.16 on Wednesday morning, near levels not seen since February this year.

Oil prices have been in this trend in recent weeks despite tensions in Iraq, Libya and Ukraine, however, it was a new report by the International Energy Agency that weighed on markets Wednesday. On Tuesday, the IEA said that oil has seen weak demand in the last few months and an oil glut has helped to keep a lid on prices. It added that markets were "eerily calm" in the face of the mounting geopolitical risks. Commenting on the report Marshall Gittler, a currency market strategist at IronFX, said that U.S. intervention in Iraq with targeted airstrikes and militarily advisers entering the country would only mean a further price fall as the risk premium diminishes.

Read MoreGas prices turn intoa silver lining for consumers

Weak oil prices traditionally can boost some assets, like airline stocks which are heavily reliant on the commodity. However, Kathleen Brooks, a research director at London-based Forex.com, believes that it could have a negative effect on stock markets more generally.

"Oil prices could be trying to tell us something about the global economic outlook," she said in a research note on Tuesday afternoon.

"As geopolitical risk mounts at the same time as some major central banks contemplate normalizing monetary policy, the global growth forecast may be too rosy. If this is the case, then the recent pullback in stocks could be the sign of things to come."

Chris Beauchamp, a market analyst at IG Markets, noted that the Brent price has broken below its rising wedge pattern - which is a bearish trend that suggests it is likely to head in a downward direction. But Beauchamp is adamant that it's the "supply element" that is at work here and any suggestions of a correction may be overdone.

http://www.cnbc.com/id/101915923
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Old 08-13-2014, 07:20 AM   #2
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Quote:
Weak oil prices traditionally can boost some assets, like airline stocks which are heavily reliant on the commodity. However, Kathleen Brooks, a research director at London-based Forex.com, believes that it could have a negative effect on stock markets more generally.

"Oil prices could be trying to tell us something about the global economic outlook," she said in a research note on Tuesday afternoon

This here is what you call a highly educated, dumb, bitch......

Here is the economic outlook, I spend less at the pump so I have more to pump into the economy. ****ING DUH!
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Old 08-13-2014, 08:02 AM   #3
HonestChieffan HonestChieffan is offline
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I think what some analysts are saying is oil demand is down because on a macro basis, the economy is not recovering and people have less to spend on things that consume extra energy. China may be in a downturn, US is not a healthy economy. Europe is screwed up over the Russia thing, and the ME is a mess that looks more like Obama is going to commit us again.

There are as many who say that is a shot in the dark as usual when trying to read all the information out "there"

Uncertainty and geopolitical issues have a lot of investors nervous.
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Old 08-13-2014, 08:14 AM   #4
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Quote:
Originally Posted by HonestChieffan View Post
I think what some analysts are saying is oil demand is down because on a macro basis, the economy is not recovering and people have less to spend on things that consume extra energy. China may be in a downturn, US is not a healthy economy. Europe is screwed up over the Russia thing, and the ME is a mess that looks more like Obama is going to commit us again.

There are as many who say that is a shot in the dark as usual when trying to read all the information out "there"

Uncertainty and geopolitical issues have a lot of investors nervous.
It can very easily be stated that the cost of oil\energy is actually restraining the economies. I've been active in he markets for 25 years. Expensive oil hurts more than it helps.
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Old 08-13-2014, 08:21 AM   #5
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Quote:
Originally Posted by petegz28 View Post
It can very easily be stated that the cost of oil\energy is actually restraining the economies. I've been active in he markets for 25 years. Expensive oil hurts more than it helps.
What these people are saying (and I don't agree with them) is that the softer oil demand is a result of slowing economies. This view ignores the huge increase in US production.
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Old 08-13-2014, 10:06 AM   #6
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Quote:
Originally Posted by KC native View Post
What these people are saying (and I don't agree with them) is that the softer oil demand is a result of slowing economies. This view ignores the huge increase in US production.
I agree with the point of softer oil demand can be a sign of slowing economic activity. What they seem to always overlook is that it is the excessively high cost of oil that is inevitably causing softer demand as well as slower economic growth.

You'd think people so educated in the field of economics could grasp such a basic concept of "cheap gas=more economic spending"?
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Old 08-13-2014, 10:18 AM   #7
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Quote:
Originally Posted by petegz28 View Post
I agree with the point of softer oil demand can be a sign of slowing economic activity. What they seem to always overlook is that it is the excessively high cost of oil that is inevitably causing softer demand as well as slower economic growth.

You'd think people so educated in the field of economics could grasp such a basic concept of "cheap gas=more economic spending"?
Wages are more of a driver than cheap gas.
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Old 08-13-2014, 11:32 AM   #8
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Quote:
Originally Posted by KC native View Post
Wages are more of a driver than cheap gas.
It's all relative. It's not the amount of wages but what the wages are spent on.
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Old 08-13-2014, 11:37 AM   #9
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Quote:
Originally Posted by petegz28 View Post
It's all relative. It's not the amount of wages but what the wages are spent on.
The amount of wages (and the rate of their increase) are much bigger than cheap gas. It doesn't matter if gas is cheap if no one has any money to buy it.
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Old 08-13-2014, 12:09 PM   #10
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The amount of wages (and the rate of their increase) are much bigger than cheap gas. It doesn't matter if gas is cheap if no one has any money to buy it.
It really is all relative.

Fuel prices factor into the cost of almost everything in our economy. If we were to suddenly start having to shell out $10.00 per gallon like they do in Europe I would be out of pocket about $80 more a week. That is only my personal expense and does not take into account the increase in the prices of goods due to increased transportation costs. So if I were to receive a $2.00 per hour raise to compensate for it I am really not better off.

In the reverse direction if gas dropped to $2.00 per gallon that would be roughly equivalent to a $00.50 per hr raise.
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Old 08-13-2014, 12:14 PM   #11
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Quote:
Originally Posted by KC native View Post
The amount of wages (and the rate of their increase) are much bigger than cheap gas. It doesn't matter if gas is cheap if no one has any money to buy it.
Not if the increase in gas\energy costs go up faster than wages. JFC, you know this, man. Stop with your Wall St. rant because you know you aren't fooling me with it.

If gas is cheap it helps to drive up wages because people are spending less at the pump and more elsewhere.
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Old 08-13-2014, 12:31 PM   #12
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Title of article should read "Supply and demand: How can we **** with this?"
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Old 08-13-2014, 12:51 PM   #13
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Gasoline prices have never made sense to me. There seems to be little correlation between crude prices and gasoline prices. There has to be intervention of some sort to keep gasoline prices low.

With crude prices where they are gasoline should be much higher than the $3.20 prices I saw today. Just the price of raw crude plus federal taxes puts it over $3.00/gallon. That doesn't include refining costs, transportation, state/local taxes and retailer profit.
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Old 08-13-2014, 01:07 PM   #14
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Originally Posted by Stewie View Post
Gasoline prices have never made sense to me. There seems to be little correlation between crude prices and gasoline prices. There has to be intervention of some sort to keep gasoline prices low.

With crude prices where they are gasoline should be much higher than the $3.20 prices I saw today. Just the price of raw crude plus federal taxes puts it over $3.00/gallon. That doesn't include refining costs, transportation, state/local taxes and retailer profit.
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Old 08-13-2014, 01:14 PM   #15
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Quote:
Originally Posted by FishingRod View Post
It really is all relative.

Fuel prices factor into the cost of almost everything in our economy. If we were to suddenly start having to shell out $10.00 per gallon like they do in Europe I would be out of pocket about $80 more a week. That is only my personal expense and does not take into account the increase in the prices of goods due to increased transportation costs. So if I were to receive a $2.00 per hour raise to compensate for it I am really not better off.

In the reverse direction if gas dropped to $2.00 per gallon that would be roughly equivalent to a $00.50 per hr raise.
Yes, you're describing cost push inflation. If that present then you will see wage inflation because workers will demand higher wages.
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