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Saudi forced crude to decline along with China's
pessimism |
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crude oil declines today after two days of gains, today's
decline is led by slowing growth in the world's second
largest economy and oil consumer China along with Saudi's
comments to cover any shortage of supply in the oil market
offsetting fears over global oil supplies. Crude oil opened
today's session at $103.64 to reach a high of $103.87 and a
low of $103.06, where it is currently trading around $103.16
a barrel. The commodity couldn't keep up with the current
factors and started to decline at the end of the week which
may be accompanied by heavy fluctuations as investors would
close their positions to prevent any unexpected losses.
However, the general trend will be bearish today amid
pessimism from China which indicates for a lower demand for
oil from the world's second largest oil consumer. China's GDP
growth came weaker than expected at 8.1% during the first
quarter of the year, the slowest pace since mid-2009,
compared with the previous 8.9% and the expected 8.4%,
increasing the chances for an additional monetary easing. The
World Bank cut its estimate for China's growth in 2012 to a
13-year low at 8.2% compared with January's projections of
8.4%, as global demand on its exports is seen easing while
domestic investment and consumption is seen decelerating.
Dear reader, we can see this downside effect from China
however, it might be helpful for crude in the coming period,
how? If China convinced to open the door for more monetary
easing to support its economy, it will encourage investors
and it will be reflected positively on crude and help the
commodity to hold its grounds. On the other hand, we can see
the downside effect from the world's biggest oil exporter
Saudi Arabia, which determined to bring down high oil prices
along with other OPEC members, the Saudi oil minister said
"Fundamentally the market remains balanced - there is no lack
of supply, where Saudi Arabia has invested a great deal to
sustain its capacity, and it will use spare production
capacity to supply the oil market with any additional
required volumes." The International Energy Agency also said
on Thursday that the oil market has broken a two-year cycle
of tightening supply conditions as demand growth weakens and
top exporter Saudi Arabia increases output. In general, all
the current factors are signaling for more downside movements
for crude weather from all factors that we talked about, or
by the stronger dollar which also playing a significant role
in pushing crude downwards, but volatility will be so high
today especially that talks with Iran will start this weekend
over its nuclear program. |
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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.