Oil: Bull Case Limited in Near Term, OPEC Scaremongering Infinite

investing.com:

At a journalism clinic I hosted in Asia some years back, one of my pleas was “don’t throw the entire kitchen sink at the story”.

A good point or two is often enough to make your case, I said, though I did raise the caveat that exemptions apply if necessary. The weakened bull case for oil has prodded me to make an exception to my own rule as I find myself thinking of every plausible reason for the market to be more bearish than positive in the near term.

And like the good-one-point-or-two rule, I believe OPEC’s reaction to any weak turn in crude prices will be to respond first with a supply scare to counter that, then with more scaremongering on round two.

Whatever the back and forth on this is, the events of the past week have produced too many new variables that look bearish in the near term for the oil market to ignore, hence my inclination in using the kitchen-sink model to tell them.

And right on top of that unsightly heap is:

China's consumer prices faltered in September and factory-gate prices shrank slightly faster than expected, with both indicators showing persistent deflationary pressures for the largest oil importer and world's second-largest economy.

China’s Consumer Price Index, or CPI, was unchanged in September from a year earlier, missing a forecast growth of 0.2%, and after a 0.1% expansion in August. Its Producer Price Index, or PPI, fell 2.5% from a year earlier, the 12th straight month in negative territory though the pace of decline slowed from August.

«CPI inflation at zero indicates the deflationary pressure in China is still a real risk to the economy. The recovery of domestic demand is not strong, without a significant boost from fiscal support,» said Zhiwei Zhang, chief economist at Pinpoint