Crude joins the downside rally at the beginning of the week
Crude oil joined the selling wave as it declined sharply since the opening of today's trading amid high uncertainty in global markets as the EU summit didn't beat all the fears, and Moody's added more negative pressures by saying that it will review its ratings for all European Union nations in the first quarter of next year. Crude oil opened the session at $99.53 and recorded a high of $99.66 then it was hammered to decline sharply and reached so far a low of $98.18, where it is currently trading negatively around $98.20 per barrel. Pessimism dominates global markets since the beginning of this week after EU summit couldn't eliminate all fears that were in markets, as UK rejected to agree on treaty changes to put stricter measures on EU members' budgets in order to be able to control any problems that could happen. However, the International Energy Agency estimates that OPEC's production may increase by 10 percent more than its official quotas. Cheating on quotas and Middle East upheavals threaten to crack OPEC unity, which could add to oil's volatility. Although, The International Energy Agency (IEA) said a boost in oil production from Saudi Arabia would provide welcome relief from the threat that high fuel prices pose to efforts to revive the global economy as higher prices than we have now can strangle economic recovery efforts worldwide, therefore the Saudi production boost currently and in the future will be very much welcomed." Crude oil will be so volatile ahead of OPEC's meeting which will be held on Wednesday, as the EU consideration to ban the Iranian oil production is pushing oil to the upside while the debt crisis and slowing global growth outlook is weighing negatively on crude. The ECB's President Mario Draghi signaled in his press conference after the bank decided to cut rates to 1.0% in order to help growth and support the economy, that the ECB might not intervene in bonds market, as it is not the bank's mandate to buy governments' bonds. On the other hand, the new ECB projections for growth and inflation were revised lower and expect that the economy might contract next year joining other organizations projections for weak Euro zone growth. The US dollar is one of the factors that are putting more negative pressures on crude driving it back below $100 levels, as the dollar is starting the week with gains amid high uncertainty around global markets. The USDIX opened the session at 78.71 and recorded a low of 78.96 where it reached so far a high of 79.12 and it is currently trading positively around 79.08. Crude will fluctuate heavily today as we said ahead of OPEC's meeting, and bond auctions from Europe which will be closely watched by investors as borrowing costs remain high despite leaders' efforts.