|News||Crude is trading below $86 this morning|
|Analysis||Crude is trading this morning below $86 per barrel due to effects from the EIA report yesterday, which has showed an unexpected climb in US inventories and fragile demand levels in the largest energy consumer in the world.|
The release of the weekly EIA report yesterday showed a rise in crude inventory levels by 2.0, compared to the previous reading of 2.9, and higher than the expected 1.0 million barrels, where it is currently around 356.2 above the medium term average range for this time of year. Meanwhile, motor gasoline plunged by 2.5 last week and remains above the medium term average range. In addition, distillate fuel that includes heating gained by 1.1 above the medium average term average range for this time of year.
Crude managed to climb this week recording its highest around $87, supported by an optimistic wave that dominated global markets that are near to completely recovering from the worst crisis since the Great Depression. On the other hand, US inventories managed to gain for the ninth week in a row and therefore reducing these gains and reflecting weak demand on oil in the US.
In addition, data showed an unexpected drop in machine orders in Japan during February, and therefore reflecting a plunge in demand by the third largest energy consumer in the world after the US and China. This plays a major role in reducing price gains.
The drop witnessed in crude is due to effects by the dollar's rise against a basket of major currencies; therefore reducing demand on commodities, alongside a drop in risk appetite by investors. The euro versus dollar fell 1.3344 with rising fears regarding Greece's inability to repay its debt, especially as some liabilities maturity date inch closer. Meanwhile, fears were also boosted by expectations that the plan offered by the EU and IMF is insufficient enough to reduce the biggest budget deficit in the euro zone, which is around 12.7% of the GDP and expected to be revised even higher!
Crude opened yesterday around $86.72 after recording its highest around $86.92 and lowest around $85.50 per barrel to close around $85.60 per barrel.
The S&P GSCI index closed yesterday to record 544.10 after plunging by 3.09; whereas the RJ/CRB commodity index also dropped by 0.93 to close around 277.59.
In NYMEX as of 02:53 EST; motor gasoline fell to record $231.110 per gallon by $0.360; heating futures are trading around $221.110 per gallon after falling by $0.280; whereas natural gasoline followed and dropped by $0.032 to record $3.987 per 1000 cubic feet. In London, Brent plummeted by $0.320 to record $85.270.
Crude opened today around $85.62 recording its highest around $85.82 and lowest around $85.47 per barrel, to currently trade around $85.50 per barrel.