Fundamental Oil Report (2011-11-30)

News EIA report
Previous -6.2 million barrel
Forecast 0.5 million barrel
Analysis Crude is moving to the downside today erasing some of yesterday's gains, as Europeans couldn't come up with a comprehensive plan yesterday, but at least, they agreed on how the EFSF will support debt laden countries which is at least a step forward but remains little details on the funding and if it can reach the desired 1.0 trillion euros firepower. Crude is volatile since the opening of the session but biased to the downside. It opened the session at $99.40 and reached a high of $99.71, but it recorded so far a low of $98.93, and it is expected to continue this slight downside move, as it is currently trading negatively around $99.25 The Euro area finance ministers after a long time, agreed on the EFSF's role and to expand the facility but without mentioning by how much, where expectations were that they would expand it by 1 trillion Euros in order to stem the crisis and prevent the crisis from spreading, however, letting the EFSF insure up to 30% of new debt laden nations' bonds and to intervene in primary and secondary bond markets. Although, investors did not see that these measures could be enough to contain the crisis, as they might be good progress, but they would not be effective enough to lower the high borrowing costs, and prevent the crisis from spreading especially as they still await the details of how they will access the market in investment vehicle and also said they might use the IMF as support for the plan. On the other hand, S&P rating agency added more negative factors that would raise fears and concerns in financial markets, as the agency downgraded 15 global banking companies most of the in Europe and U.S., which added more negative pressures on banking sector around the globe which is already struggling amid deepening debt crisis in Europe. S&P's move added more negative pressures on crude which is looking for any kind of support at the time being to continue its rally that started this week backed by American figures that showed better than expected confidence. Nonetheless, there are many factors that are preventing crude from a huge drop, as Europeans had finally agreed on the some ideas despite that they might not be enough, and they have agreed on the sixth tranche by 8 billion for Greece which will prevent the country from defaulting, and today EU 27 finance ministers will continue the meeting with Euro area finance ministers, as they may discuss how to support banks. Also, the situation in the Middle East is getting worse which threatening crude supply, as protestors in Iran are increasing pressures after an attack on the British embassy there, which will lead for more sanctions on the country, and less oil supply in the end. High uncertainty in Europe and renewing fears in U.S. after S&P downgrade move are driving the U.S. dollar to the upside, as investors are calling it as a safe haven amid these bad economic data, which pushed crude to the downside as well. Also, the EIA report may show a rise in U.S. crude inventories last week by 0.5 million barrels unlike last week when it dropped by 6.2 million barrels, which added negative pressures on crude today as less demand on it would affect it negatively. The USDIX which tracks the dollar against six major currencies opened the session at 79.07 and reached a low of 78.87 and recorded so far a high of 79.37 where it is currently trading positively around 79.25.

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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