Fundamental Oil Report (2011-04-12)

By @ibtimes on

NewsCrude recovers off lows in Asia and above $109 in Europe PreviousForecastAnalysisCrude oil continues the heavy fluctuations amid fragile market conditions and a strong dollar denting the market further. Crude slumped yesterday heavily and started south in Asia today to only recover off lows in the European session on correctional moves as the prevailing sentiment remains negative.

The WTI Crude contracts for May settlement on Monday shed $2.87 or 4.1% to settle at $109.92 per barrel. Today in the Asian session the contract continued the southern trip and declined nearly 1.9% to strike the lows of $107.87 to only recovery in the European session and currently hovering near highs around $109.70 areas with the high set so far at $109.89 per barrel.

Fears over demand to slow amid a fragile recovery and elevated prices hit the market and triggered profit taking which was combined with dollar strength. The IMF downgraded its growth outlook for both the US and Japan that are the second and third largest consumers consecutively which kept the pressure on oil seen.

Conditions were not much better in the Asian session today with losses for equities and haven demand on low yielding assets especially the yen and the dollar which also suppressed the sentiment further. The new earthquake in Japan and the raise alarm level at Fukushima plant to match that of Chernobyl disaster added to prevailing woes over the crisis in Japan further.

Investors kept an eye on Europe as well as the IMF and the EU Officials prepared to meet in Lisbon today to start preparing for the third bailout for a euro nation, to debt-laden Portugal with an estimated 80 billion euro package.

The downside pressures on growth and fears over the recovery hit demand expectations for crude and triggered a much needed correction after the heavy rally and excessive negative pressures on momentum indicators.

Still, the overall outlook remains positive and with woes calming over Libya yesterday, the ease did not prevail with the cease-fire seemingly reaching a deadlock. The political upheaval in the oil rich Middle East is keeping the upside support on crude and powered the reversal in Europe today, where the IEA said today that the oil market is likely to tighten further this year as inventories shrink on continued supply disruptions and political unrest in oil rich nation in the Middle East and North Africa which is likely to persist for months.

Heavy volatility is likely to prevail now as the sentiment is shaky, and though the correction might be seen, the general bullishness for crude remains intact. 

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