Fundamental Oil Report (2011-09-14)

News EIA report
Previous -4.0 Million Barrels
Forecast -3.0 Million Barrels
Analysis Crude oil declined since the opening of today's session amid uncertainties that dominate the market, as the European debt crisis is worsening and investors are concerned over the outlook for the Euro area despite officials comments to ease the market concerns. Crude oil for October delivery is currently trading around $89.29 a barrel where it recorded so far a high of $90.23 and the low of $88.51 from the opening price $89.86. The nations are much worried about the European crisis and the ability of Euro area nations to contain the crisis from spreading, as the Greek situation is very critical and the possibility to default is still high. On the other side, the German Chancellor, Angela Merkel said that they will not allow Greece to default, which has eased the jitters that dominate the markets over the European debt crisis. China and the United States have expressed their concerns over the European debt crisis, saying that the Euro zone nations must contain the crisis and avert contagion risks to other debt laden nations, and the Chinese Premier said that the world must not rely on China, as Europe must "get house in order" though he assured that China is ready with support. Italy held talks with China over investment possibilities to help the debt-laden nation, where yesterday the Chinese premier Wen Jiabao said that China was willing to help Europe, its biggest trading partner, but he added that Europe must stop the crisis from growing. Italy sold 3.9 billion Euros of government bonds yesterday but with a high yields with the worsening state of the market. Italy is struggling to get out of the debt crisis, where it is the third biggest Euro zone economy, setting a 54 billion Euros austerity plan to avoid the contagion risks from other European countries and today is the final vote from the Italian parliament, which will ease some of the market fears over the debt crisis and may add some positive pressure on crude oil amid the pessimism that dominates the market. France's biggest banks have experienced a downgrade as expected, where the credit rating agency Moody's, had downgraded two of the French biggest banks, the second largest French bank Credit Agricole and Societe Generale due to their exposure to the Greek economy. All these factors may affect crude oil negatively and push it to the downside, as investors remain concerned over the slowing pace of recovery around the world, and accordingly, it will affect the future demand on oil; nevertheless, today the EIA will release its weekly report about U.S. oil inventories, which is expected to report a drop in crude stockpiles due to the storm that hit the U.S. Gulf of Mexico which accounts for 27% of supply. We may see some fluctuations on oil trading but with a downside momentum due to the market uncertainty amid European debt crisis and officials attempts to calm the markets, and we may see bad performance from the labor sector in UK as expected, and a slowdown in Euro zone industrial sector.

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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