NewsEIA ReportPrevious1.0 million barrelsForecast2.8 million barrelsAnalysisCrude futures dropped this morning below $76 due to the rise in US inventory levels last week, according to the API yesterday. However, there are renewed fears in markets regarding the possible failure of the provided EU aid plan in containing the debt crisis and preventing it from leaking into other countries.
The plan is estimated to be worth one trillion dollars and is intended for the euro zone, since it is facing a shockingly high budgetary challenges which might restrain the seen economic recovery with intended heavy spending cuts by governments to stave off the continued speculation on their default.
Crude dropped after the API showed a rise in inventory levels last week by 2.95 million barrels, recording higher than expected gains. Meanwhile, motor fuel recorded gains by 1.84 million barrels; whereas distillate fuel climbed as well by 1.3 million barrels. This rise in inventories supports overall expectations of a rise in inventory levels in the EIA report due for release today at 10:30 EST.
The report is expected to show a gain in commercial crude inventory levels by 1.0 million barrels, following the previous week's buildup of 2.8 million barrels. The majority of the reports are expected to insure weakness in demand on crude oil from the largest energy consumer in the world; therefore, increasing pressure on prices to continue dropping.
On the other hand, financial markets in the meantime are affected by the chaos the debt crisis has left on Greece, where it currently seems to be spreading into other countries as well. Meanwhile, European decision makers have offered a massive aid package for the euro zone aiming to contain the crisis; however, the aid was not enough to attract enough confidence into markets as it failed is sustaining Monday's rally.
In addition, the euro versus dollar fell this morning by 1.2605, compared to the plunge it recorded yesterday around 1.2650, as the pair last week managed to record its lowest levels since fourteen months around 1.2515. This plummet by the euro increases weight on crude oil to drop.
Moreover, crude futures yesterday recorded levels around $77.15 recording its highest around $77.65 and lowest around $75.35, where it managed to close trades around $76.05 per barrel.
The S&P GSCI index closed yesterday at 512.81 after plummeting by 13.86 points; whereas, the RJ/CRB commodity index also plunged by 3.65 to close around 267.95.
As for NYMEX trading as of 02:43 EST; motor gasoline fell to record $218.580 per gallon by $0.40; heating futures are trading around $213.290 per gallon after dropping by $0.720; whereas, natural gasoline climbed by $0.015 to record $4.146 per 1000 cubic feet. In London, Brent descended by $0.024 to record $80.300.
Today, crude opened around $75.85 per barrel recording its highest around $76.10 and lowest around $75.45, where it currently is trading around $75.55 per barrel.