NewsCrude drops below $77 due to lowered Fed forecasts and growth woesPreviousForecastAnalysisCrude dropped for the second consecutive day below $77 after the Federal Reserve downgraded its growth projections, where US equities also had notably receded fueling concerns regarding the largest energy consumer in the world derailing off its recovery path.
In addition, China is also adding its fair share of concerns by reporting a slowing expansion in economic growth, spurring fears if low demand on crude.
Crude today traded below $77 per barrel recording its highest around $76.95 and lowest around $76.50, while it currently is trading around $76.65 per barrel.
The US appears to be giving mixed signals regarding the strength of crude demand, where the Feds according to the FOMC Minutes lowered their 2010 GDP forecast by 0.2% to range between 3.0% - 3.5%, emphasizing less incentive plans to help the economy.
Meanwhile, the EIA report yesterday showed a drop in US inventories by 5.1 MB compared to the previous reading of 5.0 MB, where inventories have reached 353.1 MB above the medium term average range. Additionally, distillates that include heating rose by 2.9 MB above the medium term average range for this time of year.
Crude yesterday traded around $77.07 per barrel recording its highest around $78.12 and lowest around $76.35 per barrel, closing around $76.75 per barrel. It managed to record a drop of $0.11 as the Feds downbeat revisions offset the effect of the drop in inventories.
Moreover, China, the second largest energy consumer in the world, is also playing a major part in pessimism after the expansion slowed to an annual 10.3% from 11.9%; where imports are expected to decline due to waning demand on domestic energy, while industrial output slightly rose above prior estimates although retail sales levels came in worse than expectations. This data proves the Chinese government’s success in reducing growth levels in order to support bank lending in the upcoming few months.
As for NYMEX as of 02:29 EST; motor gasoline fell to $205.890 per gallon by $0.760; heating is trading around $202.360 per gallon dropping by $1.250; whereas natural gasoline gained $0.009 per 1000 cubic feet by $4.315. In London, Brent futures plummeted by $0.420 to record $76.350.