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Crude oil hikes amid hopes from Europe |
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| Forecast |
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| Analysis |
Crude oil soared yesterday breaching above the
physiological level of 90.00 backed by hopes from Europe that
EU leaders emerged a comprehensive plan to solve the debt
crisis and better than expected manufacturing data from China
that pushed crude to the upside significantly. Crude oil for
December delivery continued yesterday's rally after it opened
the session at $91.75 and reached so far a high of $92.58 and
recorded a low of $91.08, where it is currently trading
positively around $92.50. Investors are so optimistic over
the European efforts that it would be able to contain the
crisis and prevent it from spreading, and the plan that they
would announce on Wednesday summit would be strong enough to
extend the firepower of EFSF in appropriate way along with
the progress of recapitalization of European banks. The
agreement between Merkel and Sarkozy helped investors to be
optimistic again, as Sarkozy stated that they are finding a
way together to extend the firepower of the EFSF, which
hinted that leaders would come up with a comprehensive plan
for the continent. We must point out on the inverse
relationship between U.S. dollar and crude oil, where the
U.S. dollar index that measures its performance against a
basket of foreign currencies declined today and yesterday
amid hopes from Europe and better than expected U.S.
companies' results, as it opened today's session at 76.07 and
recorded a high of 76.28 and reached a low of 76.02, where it
is currently hovering around 76.11. On the other hand, the
Chinese economy has released yesterday the figures for the
HSBC Flash China Manufacturing (
PMI
) for October, where it showed an un expected expansion by
51.1 compared with the prior contracted reading of 49.9,
which indicated that Chinese demand on crude oil will rise,
where it is considered the world's second largest oil
consumer and increasing demand from there would absolutely
drive world demand higher. And don't we forget the Chinese
role in the global recovery and how the global growth rely
significantly on China, as it considered the world's second
largest economy as well, and it is No.1 exporter around the
globe, which made investors look carefully on their exports
and economic activities when they intended to trade in
markets. However, the rise in crude oil it's not confined
only by these two major factors, but we can add the good
results that released by U.S. companies and European
companies that showed better than expected results despite
the slowing global growth and deepening debt crisis in
Europe, which relieved investors somehow. By collecting all
these data, we can come up with a conclusion that global
markets have seen a relief when an agreement appeared among
EU leaders and a comprehensive plan can be made to solve the
crisis on Wednesday, which will continue this positive
momentum until tomorrow's summit which will markets'
direction, where volatility may remain evident ahead of the
summit. |
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.