|News||Crude oil down again after yesterday's rally|
|Analysis||Crude oil returned to move south today after a temporary relief yesterday that took crude above $100 to end with positive gains. Today the bearishness is back to pressure black gold lower as seemingly the downside correction has not come to an end.|
Crude oil trended south today amid linger jitters over the outlook for commodities. Crude futures for June settlement fell as low as $100.11 a barrel from the high of $102.97 and currently hovering bearishly around $101.52 a barrel. The contract is down for now nearly 1.3% opposed to yesterday’s strong 5.5% recovery.
We saw the pressure mounting on crude in the similar manner to silver last week after CME Group, the Nymex owner, increased the trading margins for speculators to $8,438 a contract from $6,750 effective after the closing of the day. Gasoline margins will rise to $9,450 from $7,763 and heating-oil margins will rise to $8,438 from $6,413.
Temporary support to crude was seen from the strong Chinese trade figures, as the nation’s exports surged to a record on strong global demand, while oil imports rose 3.0% in April all supporting crude higher; nevertheless, the fear over monetary tightening from China offset the positive impact of the news.
With the fears over China’s move and the new CME margins, the downside pressures extended on crude, while the debt burdens in Europe kept investors jittery and supported the dollar which further pressured crude south.
The dollar index that tracks crude’s movement against its six major trading partners moved to the upside recording the high of 74.99 from the low of 74.57 and now trading bullishly over intraday basis around 74.76.
We have a mixed sentiment in the market over the prospects for the global recovery amid rising inflationary pressures, which is keeping commodities mixed and crude volatile. The expected rise in crude inventories also is downside pressure on crude ahead of the API report today and the EIA report tomorrow.
High volatility will prevail for today with the lack of major data from Europe and the U.S. which will keep the focus on the sentiment and the API inventory report alongside CME’s margin change which is likely to keep crude generally biased to the downside for now.