Oil declines due to market pessimism
Crude oil is trading within a narrow range with the mixed sentiment, as the European debt crisis fears are dominant in markets, which made investors much worried over the future of the European economy, on the other hand, the U.S. inventories are expected to have dropped in the past week as a report from the EIA will show. Investors are concerned over the outlook for the European economy, as Greece chances for default has soared, where the Greek Prime Minister George Papandreou has failed in convincing investors that his country will avoid falling. The data from the European continent spread pessimism in markets that future oil demand will decline from Europe, also, from the world's biggest oil consumer the United States which is experiencing a slowdown in growth, which as a result made investors much worried about the global pace of recovery. Crude oil for October delivery is currently trading around $88.23 a barrel where it recorded so far a high of $89.19 and the low of $88.07 from the opening price $88.88. On the other hand, we had seen many factors that affected crude oil positively, as the U.S. crude stockpiles are declining due to the storm that hit the U.S. Gulf of Mexico, which is 27% of their supply, as the EIA report is expected to report a drop in U.S inventories in the past week, which added more positive pressure on crude oil. Also, the European Central Bank's President, Jean-Claude Trichet, signaled that central bankers are not as pessimistic as investors, assuring that they stand ready to support the slowing pace of recovery, as he also said that the global economy is slowing yet it is not heading to recession in comments in Basel after chairing the Global Economy Meeting. Trichet comments about their readiness to support growth and that the global economy is not heading to a recession as investors believe, eased some fears over the future of the European economy, and the ability of the continent to get over the debt crisis, which pushed crude oil higher yesterday and added some kind of positive pressure on crude prices. In Portugal, after it made a good progress in their economic program under the bailout and they completed the requirements, for the bailout, the International Monetary Fund decided to release the new tranche. Italy had held talks with Chinese officials regarding potential investments, yet officials diluted market speculation over bond purchases by stating that it was not the focus of the talks that took place in the past few weeks, according to an Italian government official. Nevertheless it was some slight support to the market in early hours. OPEC, which is responsible for producing around 40% of global oil production, said yesterday that the main negative pressures on oil prices are coming from the sluggish global economy and the resumption of Libyan crude exports. Crude oil could be affected more by frustrating data more the positive data, as it may decline in today's session affected mainly by fears over the European region.
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