Fundamental Oil Report (2011-04-29)

News Crude lower on skeptic outlook for demand
Analysis Crude prices hovered lower this morning and off a 31-month high as investors saw signs of a shaky and slimming recovery which affected the demand outlook on crude. Crude futures for June delivery hover around $112.41 a barrel down by nearly 0.4% recording a high of $112.86 and a low of $112.35. Investors see the chance in profit taking on slowing growth across nations, yesterday US growth in the first quarter missed estimates and today South Korea's industrial production was also below expectations, and once the sentiment turns negative and bearish it is a sign of profit taking and a cooling rally. Crude is still heading to its eighth straight rise in April by more than 5.0% setting the longest stretch of monthly gains since 1983. The crisis in the Middle East and fighting in Libya kept demand on oil rising, while the dollar that hovers around its weakest in three years also supported gains for oil alongside commodities. We have been hearing comments from leaders in the industry from the IEA, OPEC, and Saudi all expressing the fears over the aftermath of the rise in oil prices and its effect on growth, consumption and inflation, and surely that will dent the rally for now as we see it as still excessive to oil's fundamentals. The US economy expanded 1.8% in the first three months of the year missing expectations and slowing from the previous quarter ahead of Income Report today expected to show spending that accounts for the biggest share of the US economy nearly halved from the previous quarter's strong pace! The downbeat sentiment might extend into the market, yet for now currencies are bolstered by rate hike prospects and stocks with good earnings. European confidence is expected weak today following the slump in German retail sales and all on the expense of rising commodity prices and primarily OIL. We see the volatility is likely to extend today with the US data and the end of the week and the month today, as investors see good chances to lock on profits. The dollar index was stable around its three-year low hovering now at 73.07 recording the high of 73.18 and the low of 73.01. Surely the dollar is holding crude from slumping heavily lower but the data today will be crucial to define whether crude will continue the rally towards $115 and $118 or the correction is only a step away!

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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