NewsCrude prices slip for the second day on outlook PreviousForecastAnalysisOil decline for the second consecutive day with the expiry of the May futures as June futures start with the downside tendency with growing fears over the outlook for the global recovery.
Crude oil futures for June settlement are hovering around $107.32 down 0.34% recording early intraday highs of $108.11 and slipping south to the low of $107.02 per barrel. The market was pressured by the downbeat sentiment that started the week with fears over inflation and tightening and developing into sovereign debt threat and slowing recovery.
With fears yesterday focused on Europe and possible debt restructuring in Greece and a block to Portugal’s aid request by Finland, the dilemma extended with Standard & Poor’s downgrading the credit outlook for the US. S&P affirmed the credit rating at “AAA” yet cited a “negative” outlook which strained the market further.
Crude for May delivery that expires today was pressured by the prevailing negative sentiment since the start of the week and ended yesterday lower by 2.3% to settle at $107.12 per barrel.
Fears are growing over the state of the global economy and the fragile recovery, where the downside pressures are to hit commodities and surely demand on oil. Comments from OPEC and the IEA yesterday added more strain on crude and extended the bearishness as they are concerned over the outlook for the market.
The EIA already said they see “indications of the slowdown in demand” which they called “alarming” and OPEC members were alarmed of the downside pressures on consuming nations amid what Saudi Oil Minister Ali al-Naimi called a “patchy” global economic recovery.
Asian stocks today tumbled on S&P’s move on the US credit rating outlook as haven demand inclined and the Japanese yen dominated the scene. The downside pressure is to extend into Europe, especially as the nation is burdened by the heaviest debt weight.
With the expected slowing expansion in the services and manufacturing industries in the euro area, the market will not take it with open arms, though it was expected, and despite the prevailing strong expansion. The fears will be evident today and the housing data from the US though expected strong will be offset shall the downside pressures prevail in the market.
Crude oil is seemingly starting the journey for a strong downside correction, and we can only say it is about time after the rally was sparked by excessive optimism and geopolitical pressures that inflated the oil fundamentals to exceed demand and supply prospects amid the fragile state of the recovery.