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AnalysisOil prices plummeted heavily yesterday, as a result of the U.S. economy releasing its EIA report; showing that oil stockpiles unexpectedly climbed, this meant that demand in the world's biggest crude consumer was weak. Since there is weak demand in the U.S., it means that prices are going to dip further, as investors panicked and left oil markets. Once this began happening, funds flew out which resulted in lower oil prices. The contract shed $2.79 closing at $68.97, while recording a high of $71.81 per barrel and a low of $68.04 per barrel.

 

The U.S. stocks closed in the red zone, as a result of fears persisting that the worst of this global recession is taking longer than presumed to end; pulling investors away from equity markets. Turning to oil shares, we see that Exxon Mobil fell 0.83 points or 1.18% to $69.00; ConocoPhillips dipped 0.81 points or 1.73% to $45.83; while Chevron Corp. declined 1.26 points or -1.73% to $71.37.

 

The EIA report was released yesterday, showing that the U.S. commercial crude oil inventories increased by 2.8 million barrels from the previous week. At 335.6 million barrels, U.S. crude oil inventories are above the upper boundary of the average range for this time of year. Total motor gasoline inventories increased by 5.4 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and blending component inventories increased last week. Distillate fuel inventories increased by 3.0 million barrels, and are above the upper boundary of the average range for this time of year.

 

Today, oil prices extend their decline, as a result of ongoing worries in the markets regarding oil demand, while the dollar weakened versus majors; it discouraged investors to buy commodities, especially since they became expensive for them, since they are priced in dollars. Also, as the stock market fell it means that future production from companies was going to be weak; thus, further weighing on oil prices. The markets today opened at $68.33, while recording a high of $68.77 per barrel and a low of $68.10 per barrel.

 

Once again, dear reader, our perspective was right regarding oil prices, as the EIA revealed that demand was still weak; meaning that oil prices were pressured from the ongoing recession, and the longer the global economic recovery will take, the longer it will take for oil prices to climb at a steady trend, as we continue to see black gold prices declining in the long run.