Crude oil slumps, heading for the biggest decline since 2009
Crude oil fell today for a second consecutive day heading for the biggest decline since 2009, still affected by Standard and Poor's decision to downgrade the U.S. top credit rating which brought concerns that the demand in the world's largest oil consumer may falter, in addition to speculation that U.S. crude oil stockpiles rose last week which spread fears over the sluggish economic outlook and demand ahead of the FOMC meeting which will keep trading volatile. Light sweet crude oil for delivery opened today at $80.71 a barrel recording the intraday high at $81.24 a barrel and a low of $75.70 a barrel and is currently trading around $79.86 a barrel. The dollar index which measures the dollar performance against six other currencies dropped today as it opened at 74.85 recording the highest at 74.93 and the lowest at 74.41 and is currently trading around 74.67. Asian stock markets plunged on Tuesday and Major indexes across the region fell between 2 and 7%, following a drop of more than 6% on Wall Street in the first trading session this week and since the downgrade of the United States' AAA credit rating by Standard & Poor's late Friday. S&P downgraded the U.S. sovereign rating by one step to AA+, losing its top rating for the first time since 1941, due to its substantial debt that coincided with the sluggish growth pace in addition to the current political regime that does not guarantee cutting the deficit in an orderly manner any soon, raising concerns demand on oil from the world's largest crude consumer would decline amid the undergoing slowdown. Central bankers worldwide are starting to move swiftly to contain the crisis and uplift faltering confidence and prevent the downside pressure from worsening the crisis. After the weekend comments from the ECB and Trichet's decision to start buying peripheral bonds to ease the tension in markets in an attempt to stave off the crisis from extending to Italy and Spain, but this move is considered a risky one by the central bank and will force the ECB to expand its balance sheet and be more vulnerable and exposed to market pressures. Investors are waiting today the Federal Open Market Committee decision, as any announcement that the Fed is instituting QE3 or a similar program would be bullish for oil prices, but odds are slimmer for a move by the Feds this meeting on QE3 but after the renewed tension on the debt rating downgrade late last Friday Bernanke might be forced to take action and maybe not with quantitative easing yet but with extending liquidity or support as the ECB did. More volatility in the session is to be seen with the focus also on U.S. crude oil stockpiles where the API is expected to report 1.5 million barrels buildup last week for a third consecutive week. The American Petroleum Institute will publish inventory figures today followed by government statistics from the Energy Information Administration tomorrow.