Fundamental Oil Report (2011-12-15)

News Oil slightly recovering after yesterday slump
Analysis Crude oil futures for January settlement are trading higher this morning despite the prevailing negativity in the market. The correction takes hold after the extensive selling yesterday triggered buying interest and seemingly the start of a slight correctional move taking crude again above $95 yet it is unlikely to last long. Crude oil futures for January settlement are currently trading around $95.69 rising 0.78% after opening at $94.89 where it set so far the high of $95.78 and the low of $94.71 per barrel. The market is recovering after yesterday's heavy losses where crude declined the most since September after OPEC decided to increase its production quota and the sentiment in the market deteriorated further on the worsening outlook for growth and the deepening debt crisis, especially after the Feds deferred from signaling more easing which left the dollar to conquer. Correctional movements are taking hold of the market after yesterday's drop was seen extensive for one day, especially as investors start to slightly downplay the effect of OPEC's decision o increase its quota to 30 MB as it is merely remains in line with current output levels due to overproduction from some countries and especially Saudi Arabia. We can see the recovery for crude alongside the eased dollar strength also after strong gains. The USDIX is trading around 80.40 down nearly 0.16% after opening at 80.52 and setting the high of 80.59 and the low of 80.29. The sentiment is clearly negative in the market yet the need for the correction after the selloff is there. Crude is still expected to continue its violently volatile trading especially as the downside pressures intensify with the strong support and the downbeat outlook for growth and stability. Growth is slowing and the macroeconomic data today will confirm it with deepening contraction across key sectors in the euro area according to the flash December PMI estimate and mixed data from the United States as well. China already started the day with its flow of downbeat data as the manufacturing sector remained contracted despite easing from the previous month, where according to the flash HSBC PMI December manufacturing index the sector contracted with the reading below 50.0 at 49.0 though recovered from November's 48.0. With growth fears and debt woes controlling the market the logical trend for crude in also bearish as seen across the board where crude attained upside support in the past period on the evident geopolitical tension. We still see the chance for the recovery and the correction today where cautious trading started the session in Europe and can extend if the Spanish debt auction today goes well like its previous auction this week that was met with strong demand and lower yields in a slight step for relief after the slump and after the record yields at the Italian auction yesterday that hammered the market. Choppy and volatile trading will prevail yet crude is likely to correct some of the losses before returning to the bearishness that will likely dominate the coming period.

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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