3.9 million barrel
-1.2 million barrel
Crude oil continued the upside rally that begun yesterday on increasing tension in the Middle East which is threatening the oil supply, as new EU sanctions on Iran may be imposed in the coming days, on the other hand, hopes in Europe that leaders would actually act to solve the debt crisis is further supporting the gains. Crude oil opened today's session at $101.16 adding to yesterday's gains, where it recorded so far a high of $101.87 and reached a low of $101.08 and it is currently trading positively around $101.82 per barrel. Many factors are keeping crude oil in high levels despite the weakening global economy, but the fact that the Middle East oil supply may shrink amid high uncertainty and rising tensions may curb oil production especially from Iran, as the EU signaled that they may ban all exports from Iran. Iran is OPEC's second largest producer which out the country on high levels in producing oil, and when EU and U.S. and the allies ban the Iranian exports, this will reduce the global oil supply indeed, driving oil prices higher and higher. Looking at hopes that are increasing ahead of EU summit which is expected to come up with decisive plans to solve the two years debt crisis and prevent it from spreading, where a report from the Financial Times signaled that leaders have agreed on expanding the rescue funds, along with the 440 billion euro EFSF, it will launch a 500 billion Euros in the European Stability Mechanism, almost doubling the firepower of the region's financial rescue system. Also, the U.S. Treasury Secretary Geithner had supported the French German plan to tighten the EU Treaties which will be presented in the crucial summit, as it aims to impose penalties on euro zone members that exceed deficit limits, in order to restore market confidence and prevent the debt crisis from spreading. To remain in Europe, the Greek parliament approved the 2012 austerity budget that was presented by the new PM Papdemos in order to cut the budget deficit and achieve the Troika requirements to ensure receiving the new 130 bailout, this step by the parliament is considered to be encouraging and shows committment to control its deteriorated economic situation. On the other hand, the U.S. crude inventories might have declined last week, as the EIA may announce a drop in U.S. inventories last week by 1.2 million barrels compared to last reading which showed a rise in stockpiles by 3.9 million barrels. Volatility may remain evident on crude trading today ahead of the EU summit which will start tomorrow and investors are depending on decisions leaders may take to stem the debt crisis, although, the upside rally may keep its momentum if conditions in the Middle East continue deteriorating.