Markets

Fundamental Oil Report (2010-11-17)

News Crude falls on China tightening and Europe debt woes despite US inventories drop
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Analysis Crude oil continues the bearishness and ended yesterday lower as the dollar continued strong amid raging debt woes from Europe suppressed the risk appetite further. While the most dominant fear was speculation over further Chinese monetary tightening weight on demand prospects from the world's biggest consumer. Crude oil yesterday slid 3.0% to settle below $83 per barrel around $82.25 after recording the lowest since the start of November at $82.03 per barrel. Ongoing market jitters over Chinese monetary tightening to counter inflation and prospects for a new bailout for Irish demand weighed on the market amid a strong dollar, offsetting the good data from the US and signs of improving demand. Chinese Premier Wen Jiabao said yesterday that the government was drafting measures to counter inflation and that affected demand prospects from the world's biggest energy consumer. The focus on China and the prospects for weaker demand offset the good data from the US yesterday. We had positive signs of demand picking up from the US, where according to the API crude inventories slid 7.7 million barrels compared to the expected for 100,000 barrel build. The inventory decline comes ahead of the awaited EIA report today which is expected nearly unchanged from the previous week. Though the improving demand from the US and the drawback in inventories should be supportive of crude, yet the ongoing negativity and jitters are controlling the market. The dollar continued stronger today and the euro slid to a seven-week low as debt woes continue to control the market. Crude futures for December settlement traded bearish in Asia and continued soft into the European session as the dollar strengthened and Asian shares declined. The contract so far recorded the low of $81.15 and the high of $82.64 as they settle below $83 areas and currently hovering around $81.30 per barrel. The market is focused on prospects for a new bailout for Ireland as European Finance Ministers start working on a possible aid for the nation's debt-laden banks and still did not reach a supportive resolution to ease the fear of default and spread of the debt crisis. Heavy inflation and housing data from the US will also keep the market jittery today and the likelihood is that the dollar's strength will continue to weigh on crude and even if the EIA reports another drop in stockpiles the bearish correction seemingly will be stronger and will continue for the time being amid fragile and unstable market conditions.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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