Crude oil retreated in the beginning of the week following two days decline, as investors concerned about the European debt crisis that will reduce the economic activities, which will limit the European growth further more increasing bets that the future oil demand will decline as a result.
From Germany, comments and signs increased over a Greek default, as senior politicians from Merkel’s coalition have raised their open remarks about a possible Greek default. Also, concerns increased over the outlook for Greece and speculations that Greece will default ultimately as they couldn’t so far cut the budget deficit as the EU/IMF called, where the Greek Prime Minister George Papandreou has approved on new measures to close the budget deficit.
The French top banks are threatened with a possible credit rating cut by Moody’s as sources related to the matter said, adding more jitters and challenges to the markets, as the French lenders have the highest overall exposure to Greece, according to the Bank of International Settlements.
The European debt crisis’ fears are dominating the global markets with speculation that Greece will default sooner or later, which will ultimately drive the European banks into the abyss and experience a new recession in Europe at least.
The situation in Europe had increased bets over the future oil demand raising bets that it will fall amid bad economic activities and worse than expected pace of global recovery.
Fears over the Gulf of Mexico had eased as the Nate had weakened and moved forward in other cities in Mexico, which in turn reduced jitters over oil supply in the United States which had seen a drop in its oil inventories last week, as the EIA report showed.
Oil has seen a big drop amid the deepening debt crisis in Europe which will hammer the future oil demand, also, the U.S. dollar soared for the third consecutive day due high demand as a safe haven instead of gold, which has affected crude oil negatively.
A resignation of a top German European Central Bank board member made further doubts on Europe's ability to handle the debt crisis and finish it, which in turn increased fears in the Asian markets about the European future and led the stocks downside.
Oil may continue the decline in case concerns and fears remain dominant in markets over the European debt crisis with poor fundamentals from major economies around the world.