|News||Crude drops below $80 as the dollar surge on uncertainty|
|Analysis||Crude dropped throughout this morning’s trading session below $80 per barrel, after the dollar gained against majors and the euro in particular, and risk aversion filled the market on Greek downgrade concerns.
The dollar managed to appreciate to its highest levels in nine months, with growing speculations of credit rating downgrade for Greece due to the ongoing struggle to reduce the budget deficit, after promises made by the Greek government to the EU. However, Greece's plan seems to be insufficient to markets and rating agencies to cover the deficit. Standard & Poor’s said last night they might cut Greece’s BBB+ rating by the end of Mach and Moody's followed today morning with the same comment. The downgrade speculation increased and the downside pressure was seen on the euro that continued to slide and affected the sentiment in the market as equities and commodities slumped.
The release of the EIA report yesterday showed a rise in oil stockpiles by 3.0 million barrels, compared to the previous rise of 3.1 million barrel; higher than expectations for 1.8 million barrels; stockpiles are at 337.5 and above their average for this time of the year. Meanwhile, motor gasoline fell by 0.9 million barrels last week, maintaining its highest level above the medium term average; while distillate fuel inventories dropped by 0.6 million barrels.
Crude contracts rose yesterday by 1.5% nearing $80 per barrel, after Mr. Bernanke's insured rates to linger at low level to support the undergoing recovery, which increased expectations for revived demand from the world’s largest economy; on the back of the testimony to Congress the dollar fell while equities and commodities advanced.
The S&P GSCI index closed yesterday at 518.76 rising by 5.51; whereas the RJ/CRB commodity index recorded gains of 2.34 to close at 274.74.
In NYMEX as of 03:30 EST; heating oil futures dropped to $203.470 per gallon by $0.740; motor gasoline is trading around $208.910 per gallon after declining by $0.980; whereas natural gas contracts also fell by $0.013 to record $4.846 per 1000 cubic feet. In London, Brent receded by $0.390 to record $77.700.
Crude opened today at $80.25 per barrel, recording its highest at $80.30 and lowest at $79.40 to currently trade around $79.60 per barrel.