After making new six-month lows last week and threatening to test the $90 level, crude oil prices roared back to life. The rally was capped Monday by a wild expiration to the October futures contract that saw prices post an all-time record one-day move on a squeeze. Other contracts also moved higher, though not as explosively, and the market now seems to be stalling out around $110 a barrel. That's right at the bottom of a big Labor Day gap that should provide firm resistance for now.
The trials and tribulations on Wall Street continue to provide plenty of uncertainty for the energy market. Collapse of major investment banks and hedge fund players caused by the debacle is fueling liquidation of commodities, just as the turmoil raises the specter of slower world growth that could cut demand. But at the same time, central banks and governments around the world, led by the U.S., are pouring hundreds of billions of dollars into the banking system that could ultimately spark new inflation fears. And, commodities could gain be in vogue if hedge funds see limited returns in the stock market that leads them back to the energy complex.
Supply concerns also underpin the move off the lows. To read Bryce Knorr's complete weekly energy review, click HERE.
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