by Calculated Risk on 11/03/2014 09:00:00 PM

Two weeks ago, Professor James Hamilton wrote: How will Saudi Arabia respond to lower oil prices? (read entire piece!).  Hamilton wrote:

it’s primarily a question of responding to surging output of U.S. tight oil. My guess is that Saudi Arabia would lower prices rather than cut production ...

And today from the WSJ: Oil Skids as Saudis Adjust Prices

U.S. oil prices tumbled to a fresh two-year low Monday on news that Saudi Arabia cut its selling price for oil to the U.S., suggesting that the kingdom is trying to compete with U.S. shale oil.

Bloomberg shows WTI down to $78.24 a barrel, and Brent down to $84.78. So gasoline prices should continue to decline (currently $2.96 per gallon national average).

Tuesday:
• At 8:30 AM ET, the Trade Balance report for September from the Census Bureau. The consensus is for the U.S. trade deficit to be at $40.7 billion in September from $40.1 billion in August.

• At 10:00 AM, the Manufacturers' Shipments, Inventories and Orders (Factory Orders) for September. The consensus is for a 0.7 decrease in September orders.