Crude oil fell today in the Asian session after the U.S. had failed to reach a deal on raising the debt limit which may cause the nation to default, threatening the U.S. economy and thereby may negatively weigh on oil demand from the world’s largest oil consumer.
In addition, Moody’s decision to cut Greece’s credit rating three steps from Caa1 to Ca along with the dollar's appreciation have caused negative pressures on crude oil.
Light sweet crude oil for September settlement dropped today after it opened at $99.52 a barrel recording an intraday high of $99.61 a barrel and a low of $98.73 a barrel while it is currently trading around $98.86 a barrel.
Moreover, the dollar has rebounded to the upside today, recovering some of the losses incurred in the past session, mainly affected by the depreciating European common currency, which forced further pressures on commodities to extend the losses and to trade lower today.
The USDIX opened today at 74.08 recording the highest level at 74.30 and the lowest at 73.96 where it is currently trading around 74.26.
Negotiations between U.S. lawmakers wrapped up yesterday in Washington without a clear decision to lift the debt-ceiling. The $14.3 trillion debt ceiling needs to be raised by Aug. 2 or the government would be at risk of defaulting on its obligations. Also, the three rating agencies (Moody’s, Standard & Poor’s and Fitch) said they will cut the U.S. top-level credit ranking if a failure to raise the limit led to a default, which brought fears and concerns in the markets.
In Europe, European leaders have finally come to an agreement regarding the second bailout package for Greece last week, which was divided into two parts, the first one counted 109 billion euros to be provided by the Euro zone and the International Monetary Funds, while around 50 billion euros will be the financial institutions contribution to the bailout after the agreement on a series of bond buybacks.
After Fitch’s agency considered the Greek bailout as restricted default, and that the status will be in the interim as soon they will raise the rating to low investment grade as the private investors regain the new bonds under the bond buyback program, Moody’s agency followed by downgrading Greece’s credit rating from Caa1 to Ca, saying that the EU financing package for the debt-laden nations implies “substantial economic losses” for the private creditors.
Mixed sentiments are controlling the market in the current time, while we are waiting for the decision from the U.S. regarding the debt ceiling to be increased, which is adding more volatility and jitters to the market.