Fundamental Oil Report (2011-12-01)

News Crude fluctuates after yesterday's hike
Analysis Crude oil continues its rally that begun yesterday after six Major Central Banks lead by the FED started a US dollar liquidation strategy by increasing the US dollar quantities in order to avoid any credit crunch between European banks amid deepening debt crisis, but more U.S. inventories yesterday had limited this incline. Crude oil opened today's session at $100.40 and recorded a low of $100.18 and a high of $100.87, where it is currently fluctuates around $100.53, where crude had benefited significantly yesterday when more dollar will be pumped in the global system which pushed US dollar to the downside. The world leaders are taking serious measures into consideration as we saw yesterday in order to contain the crisis and prevent it from spreading, where the central banks' move aimed to avoid credit crunch mainly among European banks as the crisis drove fears and concerns higher which hit the confidence among consumers, investors and banks to spend or lend money. Crude oil acted positively on the move to reach very high levels above $101.00 level, as it indicated that crisis would be contained if serious moves were adopted by policy makers, also, China took a brave action by decreasing the banks' reserve requirements in order to increase the money supply in the sluggish economy. As for the Chinese economy, the PMI manufacturing and the HSBC PMI manufacturing showed a contracted manufacturing sector for the first time in three years, which added fears over the Chinese economy which has a main role in the global economy, and China considered the world's second biggest oil consumer, and a weakening economy would affect oil demand significantly. On the other hand, crude remain volatile today amid contrarian of major factors that affect it, and it rose for very high levels which pushing it the downside as a correctional move, but the positive daily closing for crude above the physiological level $100 considered positive for it. Back to Europe, policy makers are struggling to control the crisis and prevent it from spreading to Europe's big economies, as Germany retreated from its past stance and now it is ready to expand the resources of the IMF via bilateral loans or increasing special drawing rights, which would ultimately help to support the Euro zone debt laden nations. Yesterday, the EIA report showed that the U.S. commercial crude oil inventories increased by 3.9 million barrels from the previous week to stay in the upper limit of the average range for this time of year, while Distillate fuel inventories increased by 5.5 million barrels last week and are in the lower limit of the average range for this time of year. It is widely expected that crude will be so volatile today amid mixed factors that affect it, as it reached so high levels yesterday and it might show intends to continue this rally, or pessimistic fundamentals would take it to the downside along with Spain and France auction which may show less yields amid confident investors at this time, but actually, we don't think so…

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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