NewsDespite the drop today, expectations are still bullish supported by OPEC
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AnalysisAfter the gain we witnessed for the dollar index yesterday, still managed to end the day with gains. Optimism over the state of the U.S economy continues to support the gains, where trading ended at $79.15 per barrel, after opening at $78.50 per barrel; yet the most supportive yesterday was mainly investors’ squaring to open positions as the February contracts expired. 

The dollar yesterday managed to rise against a basket of foreign currencies, after support from US economic data that appeared to be better than expected, showing rising money inflows into the country. Meanwhile, the dollar index opened trades yesterday at 77.11 to close at 77.51.

Today, crude contracts fell in the Asian session, after China appeared to be resorting to different methods to curb credit in the country. Fear started to rise again in the market that the Chinese rein in on stimulus measures will slow the pace of the economic recovery.

China is adding more restrain and restrictions on banks’ and aiming to limit lending, where loans reached 9.59 trillion Yuan last year, and that is feared by the Chinese government to be fueling a new asset bubble.

As the dollar gains grounds today on Chinese pessimism and instability after downbeat financial earnings, oil was pressured to continue the heading south. Adding to that, expectations are seen for today and tomorrow’s inventory report to show a rise in US crude stockpiles. Crude is currently trading around $78.55 per barrel, after opening trades today at $79.15.

Meanwhile, OPEC previously indicated that inventory levels are high in the US, where they insured that inventories can handle any incline that may occur in demand levels. Nevertheless, the downbeat sentiment for the oil market is likely to be short lived, especially after OPEC raised worldwide demand expectations on oil by 20,000 per barrel to reach 85.15 million barrels per day.