All Reports Eve with EIA, The Fed and GDP Numbers

Today is October 31. All Hallow's Eve. Ghosts and goblins. Costumes and candy. And reports—lots and lots of reports. There is the EIA announcing its Weekly Petroleum Status Report, the Fed announcing its latest interest rate move (hint: cut), and of course the third-quarter GDP numbers are due, along with a host of others.

These reports are being released at a time when Oil continues its climb upward, Monday ending at a record $93.53 a barrel. Newspaper editors around the world are rubbing their hands together and prepping the 3 inch tall headlines for when Oil hits that magical psychological threshold of $100, something which months ago seemed like the ending of a Stephen King novel. It is still as scary, but reality is getting closer. Monday's $1.67 jump was likely a reaction to a weaker U.S. dollar and the temporary, weather-induced closure of some Mexican crude production facilities and ports. Of course, as prices rose, there are always those who advise profit taking, and prices have dropped a bit today, probably because people listen, but we don't see that as much more than a minor hiccup in the upward trend. Analysts are expecting today's EIA report to show a small increase in crude stockpiles, the effect of which may have already been accounted for with Monday's drop in price. But they were wrong last week, and could be again.

Meanwhile, the dollar is hitting records of its own—on the opposite end of the spectrum—and the Fed is all but assured to cut rates (or you can paste this to your wall with a giant "haha! They got it wrong" post it in the middle). With Oil and other commodities on the rise (usually a signal of a strong economy), it is unusual to see the Fed cut interest rates usually an effort to strengthen an economy. But the US is not an island, and the old adage of "the US sneezes and the rest of the world gets a cold" may not be as true anymore. The boomtown economies of Asia provide some immunity to global flu, and make the Fed take more of a global view when making their decisions.

Lately, the story of the weaker dollar is also the story rising hard assets prices writ large. Gold and Oil have both been pushing up the roof. Gold and oil share essentially no causal relationship—less gold doesn't somehow mean less oil, or vice versa—but they respond to similar external factors. Political unrest, war and the weak dollar have all served to support them both: Oil because of supply fears, and gold because it is considered a hard currency when the dollar is weak and a place to run in times of uncertainty (like, say weird sanctions in Iran).

So tomorrow we'll find out if the analysts are correct in predicting oil inventories up a bit and interest rates down a bit—and we'll see what, if any difference it makes to the market.

Trick or Treat.

Dollar and oil hit new records FT.com October 30, 2007 01:12

Fed's Impact on World Less U.S.-Centric WSJ.com October 29, 2007

Oil Could Face Resistance In Its March Toward $100 WSJ.com October 29, 2007

Oil Tops $90 on Range of Worries WSJ.com October 26, 2007

Crude Oil Falls From a Record After Mexico Resumes Production Bloomberg.com October 30, 2007

Goldman Says ‘Take Profits' After Crude Oil Reaches Record High Bloomberg.com October 30, 2007