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Oil traders celebrate as Fed launches QE3

Oil markets
By Paul Hodges on 17-Sep-2012

Brent Sept12a.pngIt was a very good week for traders in oil markets. Guaranteed profits are rare enough these days, even for them. But the combination of Mario Draghi at the European Central Bank, and then Ben Bernanke at the US Federal Reserve, meant they could put the champagne on ice as soon as they entered the office on Monday morning.

As the chart shows, oil prices fulifilled their wildest dreams. They not only rose steadily during the week. But they got a nice little jump on Thursday evening, once the Fed’s QE3 move was confirmed. Even the pre-weekend profit-taking still left prices $1/bbl higher on the week.

Of course, this is a zero-sum game. For every winner, there is a loser. Sadly, it is blog readers who will be the losers. Oil prices are now even further into the demand destruction zone. Thus today’s higher prices will lead to lower volume in Q4. And on a personal basis, we will all be hit by higher prices for transport fuel and heating.

Benchmark price movements since the IeC Downturn Monitor’s 29 April 2011 launch, with latest ICIS pricing comments, are below:
PTA China down 19%. “Some of the major polyester makers are mulling production cutbacks in the coming weeks because of their insufficient feedstock inventories and squeezed margins”
HDPE USA export, down 16%. “Sources said they expected availability to improve by the end of the month if sales into the domestic market do not remain strong”
Naphtha Europe down 9%. “Outlook for the European naphtha market remains bleak, with crude oil-driven price hikes emphasising concerns of demand being disrupted further”
Brent crude oil down 8%
Benzene NWE up 12%. “Sources largely agree that the continued uptrend has been driven by short covering”