Crude returned to trend south after the temporary relief rally seen on Monday as slowing growth is paramount and pressuring crude to the downside on weaker demand outlook. The dollar’s rebound also weighed negatively on crude and intensified the downside move.

Growing downside pressures are rising and growth is slowing further, all dampening the appeal of oil and the outlook for demand. The crude oil futures for September settlement declined to the low of $86.62 from the opening of $87.72 a barrel and currently hovering around $86.70 a barrel.

Germany reported downbeat growth figures this morning offsetting the upbeat sentiment from Europe that prevailed yesterday. The German economy almost stalled in the second quarter with a sluggish 0.1% expansion, following the reported weak French performance that also stalled in the second quarter.

Slowing growth in the biggest two economies in the euro area intensified the downside pressure and the weak outlook for growth in the euro region that is suffering from the fiscal imbalances and with slowing growth the nations are to suffer further to reach their deficit reduction plans.

Hopes yesterday or a strong Franco-German stance on the worsening crisis waned with the weak growth figures and after comments from Germany dismissed chances for discussing joint bonds that the market expected and instead talks will concentrate on fiscal discipline, dismissing any hope that the meeting will provide any comfort to the market.

The dollar rebounded today as equities turned lower and the sentiment weakened again and focused on the slowing recovery. The dollar index rebounded to the high of 74.16 from the low of 73.80 and currently around 74.14.

Expectations are for more downbeat news from the U.S. session with the slowing housing starts in July as the recovery also struggles in the United States. The slowing recovery and growth outlook for the global economy is downbeat news for crude and consumption expectations and we still expect more downside pressure on crude for now amid the dire outlook and the fragile sentiment.