|News||Crude falls back below $79 per barrel affected by the dollar’s strength|
|Analysis||Crude oil future dropped to $79 per barrel throughout the Asian session today, affected by weak demand levels from industrial nations; as well as strengthening dollar that pressured dollar denominated assets to the downside.|
Demand levels on oil remain fragile all around the U.S and Europe, with increasing expectations that China's demand support oil prices. Nevertheless, risks are confronting those expectations as woes started to increase that China’s steps to restrain flooding liquidity and tighter monetary rules will slow the pace of the recovery. Therefore, it will be affecting the global economic pace to recover as it remains the pillar driving growth.
The euro dropped against the dollar in early trading to record 1.4386, after recording levels near 1.4500 yesterday. Investors are leaning towards purchasing the dollar, especially with confidence levels falling in financial markets; on the back of the Chinese woes which is driving investors to the dollar and the yen.
On the other hand, yesterday retail sales in the U.S plummeted in December by 0.3% below financial market expectations. While weekly jobless claims increased also above expectations last week mirroring continued deterioration in the labor market and persisting weak demand on the back of that with unemployment at 10%.
Dear reader, global economic data seem to be supporting expectations of crude prices continuing to range $70 - $80 per barrel in the coming period. The range is merely the combination of the progress starting to be witnesses alongside remaining high inventories and still sluggish demand accompanied by dollar volatility and financial markets instability.
The S&P GSCI index closed yesterday at 527.71, setting a drop by 2.65 points; while the S&P GSCI energy index closed at 266.43 after falling by 1.52 points.
Today, we await the release of U.S data especially December’s Empire Manufacturing index, where it is predicted to have improved significantly. In addition, expectations also include improving confidence levels in the U.S throughout January; reflected by the University of Michigan Confidence Index. The improvement witnessed in the data will be interpreted as enhanced demand levels on oil from the biggest energy consumer in the world.
In NYMEX; future heating contracts for February delivery fell to $2.07 per gallon by 1.3 cents, while motor gasoline followed and dropped by 1.05 cents to $2.07 per gallon; whereas natural gas contacts plummeted by 6.3 cents to close at $5.53 per 1000 cubic feet. Meanwhile, Brent dropped in London by 63 cents to record $77.94.
Today, crude oil future contracts opened at $79.22 per barrel, recording its highest at $79.25 and lowest at $78.75 per barrel, while presently trading around $79 per barrel.