Fundamental Oil Report (2011-12-22)

News Crude is volatile ahead of US GDP figures
Analysis Crude oil soared yesterday after the EIA reported an unexpected drop in US oil inventories signaled that demand is rising in the world's biggest oil consumer economy, along with the effect of the cheap lending operations that operated by the ECB. Crude oil opened today's session at $98.94 and reached a low of $98.53, where it rose to record so far a high of $99.37, and it is currently trading around 99.30. Positive factors that seen yesterday kept crude trading high, as the EIA showed that the U.S. commercial crude oil inventories decreased by 10.6 million barrels from the previous week. At 323.6 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year, where distillate fuel inventories decreased as well by 2.4 million barrels last week and are in the lower limit of the average range for this time of year. The EIA report have pushed crude significantly to the upside, as it signaled the fact that the recovery is gaining momentum, and the economy is doing well in the fourth quarter as the demand is exceeding expectations for the time being amid positive signs that appeared lately, and it had a double effect on crude trading as the global oil supply is under threat, as the US joined the EU by considering ban the Iranian oil supply. The European Union along with US are considering new sanctions on Iran to ban its oil supply, which added pressures that it will affect global oil supply that may not match the global demand, as EU, U.S. and Asia-Pacific allies discussed possible measures early this week, and vowed to increase pressure on Iran to abandon a suspected nuclear weapon program. Crude oil rose yesterday early after the ECB held auction that would ensure enough liquidity among European banks, as the ECB allotted 489 billion Euros to banks and said that 523 bank have called for these three years loans. Hopes increased in financial markets after ECB's move, which could ensure enough liquidity among banks, and to support the whole economy, also, banks could take an advantage of these loans by buying European bonds and make profit, which will push borrowing costs to decline despite uncertainty. Today, crude is looking to be confused amid mixed factors that affecting it, and ahead of the economic performance of the world's largest economy in the third quarter, as US is going to release its final reading for the GDP in the third quarter, and is expected to maintain its pace 2.0% for the quarter. The US dollar is weakening today, which add signs that crude oil would continue the upside rally due to weakening dollar, also, good data from US and Europe would help crude to rise and achieve high levels. The USDIX which tracks the dollar performance against six major currencies opened the session at 79.97 and recorded a high of 80.05 then it declined to reach so far a low of 79.64, where it is currently trading around 79.66. Volatility will be the status of crude oil today after it rose significantly in the past two days and downside corrective wave is expected to affect crude negatively, but the positive momentum that gain from different factors is strong and would not be beaten easily.

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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