Financial markets slumped on Tuesday amid worries over the economic outlook in the Eurozone. Moreover, as deadline of the Greek PSI approaches, investors feared that the demand would be short of 75% and lead to a disorderly default of Greek debts. Wall Street tumbled with the DJIA and the S&P 500 index losing -1.57% and -1.54% respectively. In the commodity sector, the front-month contract for WTI crude oil plunged to a 3-week low of 104.51 before settling at 104.70, down -1.89%. The drop in oil prices was also driven by possible talks between Iran, and the US and its Western allies.
The pace of global economic recovery has remained worrisome. The Eurozone economy contracted for the first time since the 2Q09. GDP contract -0.3% q/q in 3Q11, following a modest gain of +0.1% in the prior quarter. On annual basis, growth eased to +0.7% from +1.3% a quarter ago. This was in line with flash estimates published earlier this year. Consumer spending was dragged down by rising unemployment and worries over the sovereign debt crisis in the Eurozone. Market concerns over the Eurozone have turned to recession from debt problems. In Asian session today, Australia reported that its GDP growth eased to +0.4% in 4Q11, from a downwardly revised +0.8% in the prior quarter. The slide in housing prices in Australia last year has dampened consumer spending.
The US, France, Britain, China, Russia and Germany agreed to resume negotiation with Iran regarding its nuclear development. While Israel remained concerned about its safety and indicated that the use of military intervention is possible, the US and its Western allies continued to favor diplomatic means for the moment. US President Barack Obama believed that the political and economic pressures imposed on Iran over the past few months have worked and these have forced him back to the negotiation table.
The industry-sponsored API estimated that crude oil inventory climbed +4.6 mmb to 346.51 mmb in the week ended March 2. Gasoline stock slipped -2.25 mmb and distillate climbed +0.92 mmb. The DOE/EIA is expected to report that crude inventory rose +2.00 mmb while both gasoline and distillate dropped -1.75 mmb and -1.50 mmb respectively.