The G20 has a 47 point plan to save our economic future. That comes out to be is 2.35 points per country from the group that represents about 85 percent of the world's economy and two-thirds of its population. Still it is unclear that any of these points will have any real impact on the oil market because there is no new stimulus and oil is focused on rising global supply and accelerating demand destruction. Overnight comes word that Japan has joined the EU in a recession and talk about world regulation won’t change that. Of course the near term direction in oil is totally focused on demand destruction.

The big news on the demand destruction story comes out of China, the biggest driver of oil demand growth this past decade. AFP as reported by Dow Jones Newswires says that, “China's demand for oil is falling sharply. Inventories are surging as the global economic downturn is gradually being felt", quoting a statement from China National Petroleum Corp website. CNPC says that production at the nation's top oil producer has been affected "adversely" as the international financial crisis has continued to take its toll on the country. The impact has become even clearer since September, the statement said, citing CNPC president Jiang Jiemin, who was speaking at a recent company video conference. Sinopec, the country's number one refiner, said in its third quarter report that sales of oil products between July and September went down by 3.2% from the second quarter to 31.8 million tons. The bottom line is that economic growth in China was last reported at 9%, the slowest in 5 years is obviously slowing further.

So if China demand is slowing and Japan is in a recession, then where is the demand growth going to come from. Well the answer is nowhere. Global demand for oil should go negative next year and may not recover until late next year. The 2010 growth should start again but that is little comfort to oil bulls that have to deal with the situation we have today. And it appears that the G20 punted. Hopes for a global rate or tax cuts were dashed and instead we got 47 points of light. They have agreed to agree that economic meltdowns are bad and they will work together to prevent them but beyond that it's unclear exactly what good will come out of it. They say they want to flag risky investment patterns and amid serious challenges to the world economy and financial markets they are determined to enhance our cooperation and work together to restore global growth and achieve needed reforms in the world’s financial systems. They said that over the past months our countries have taken urgent and exceptional measures to support the global economy and stabilize financial markets. These efforts must continue. At the same time, we must lay the foundation for reform to help to ensure that a global crisis, such as this one, does not happen again. Our work will be guided by a shared belief that market principles, open trade and investment regimes, and effectively regulated financial markets foster the dynamism, innovation, and entrepreneurship that are essential for economic growth, employment, and poverty reduction.

Sounds good but what do they think caused it. Capitalism was put on trial as well as the free market system and at least in the statement they released, our system did not get the blame. Well not totally. At least not in so many words or did it? The G20 said the root causes of the current crisis was that during a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, (oh sure, pick on Greenspan why don’t you) keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions. Ok, now they are going after Senator Barney Frank. Major underlying factors to the current situation were, among others, inconsistent and insufficiently coordinated macroeconomic policies, inadequate structural reforms, which led to unsustainable global macroeconomic outcomes. These developments, together, contributed to excesses and ultimately resulted in severe market disruption. In other words the rest of the world was in denial that the US credit crisis was their crisis.

But as far as new action with the wallet they only talked about old action and the potential for action in the future. They said that they have taken strong and significant actions to date to stimulate our economies, provide liquidity, strengthen the capital of financial institutions, protect savings and deposits, address regulatory deficiencies, unfreeze credit markets, and are working to ensure that international financial institutions can provide critical support for the global economy.

Yet they also say that more needs to be done to stabilize financial markets and support economic growth. Economic momentum is slowing substantially in major economies and the global outlook has weakened. Many emerging market economies, which helped sustain the world economy this decade, are still experiencing good growth but increasingly are being adversely impacted by the worldwide slowdown. Against this background of deteriorating economic conditions worldwide, we agreed that a broader policy response is needed and plug regulatory holes before they bite into the economy. "We must lay the foundation for reform to help ensure that a global crisis, such as this one, does not happen again." Part of the 47-point plan calls for the creation of "supervisory colleges," where financial regulators can compare market notes across countries, better co-operation between nations on regulations. Also the eventual standardization of accounting rules governing how companies can value asset. (How about trading them at the CME?)

The bottom line is that if you were looking for change out of the G20 there was little change to inspire the market. There is no shot of confidence coming out of the meeting and no surprises and that in and of itself is a disappointment. For oil the status quo is the status quo and we still have to sell rallies.

There was a time not too long ago when a Nigerian pipeline explosion would have rocked the market. Now that we are involved in a slowing global economy, well not so much. At the same time it is an example of the changing global power structure and the changing face of politics in a world with plenty of oil. Production in Nigeria was shut in after a pipeline breach in the western part of the Niger Delta according to Dow Jones. Its comments, which follow reports of an attack on a Chevron pipeline serving the Escravos terminal, come after militants seeking better oil revenue redistribution called a ceasefire in September. In an emailed statement Chevron said, "one of its pipelines was breached and its onshore production was shut in Delta State on Friday." The U.S. oil major said, "it is currently assessing the situation while the incident has been reported to relevant government agencies." Nigerian rebels are calling for talks and calling the oil majors to comeback. Russia and its economies are down on its knees and the world is changing.

We're short from the November crude oil contract and that we rolled to a short December contract that we rolled on Friday so that we now have a short contract in January!!! Numbers will follow tomorrow.

We're long December heating oil from apprx 18000 - raise stop 18100!

Sell December RBOB at 13600 - stop 14400.

Buy December natural gas at 515 - stop 500.

Have a GREAT day!