|Analysis||Oil rose above $70 a barrel, at the end of a week that witnessed a remarkable drop in crude prices, as industrial production in China showed further expansion. In the previous seven sessions, oil fell near 10%, marking the longest stretch of losses since July on fears in markets, oversupply, and advancing dollar.Concerns over Dubai world debts and downgrading to debt ratings in the U.K. and Greece ignited woes that the financial sector is still fragile and may thwart recovery.|
Also, the ample supply of crude participated in the drop in prices as shown by the EIA report released yesterday which gave a clue that demand on energy in the world's top consumer had declined. Total motor gasoline inventories increased by 2.2 million barrels, the highest since April, while distillate fuel inventories increased by 1.6 million barrels. In addition, Saudi Arabia, the world's no.1 crude producer, said that it will increase oil supplies for refiners in China, South Korea, and Japan in January.
In the currency market, the U.S. dollar inclined for five consecutive sessions which sapped demand on dollar-denominated commodities. The greenback along with the yen gained this week as refuges amid concerns in markets. Meanwhile, the dollar index, which tracks the dollar movements versus a basket of major currencies, is holding firm at76.05 compared with the day's opening at 75.99 after doing a mild downside correction yesterday.
However, oil managed to rebound slightly today boosted by the upbeat industrial production figures in the China. Output in the second-largest crude consumer in the world climbed in November to 19.1% from 16.1%, providing documentary evidence that the world's catalyst is leading the recovery.
Currently, oil is traded at $70.80 recording a high of $70.97 and a low of $70.32, whereas the contract on Thursday shed $0.13 closing at $70.54, while recording a high of $71.39 per barrel and a low of $69.81 per barrel. Nevertheless, oil may rebound further today as it is oversold as indicated by the Stochastic Oscillator momentum indicator on the daily charts.
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