Fundamental Oil Report (2011-05-12)

By @ibtimes on

NewsCrude mixed as investors weigh the heavy slump yesterday PreviousForecastAnalysisCrude oil is fluctuating heavily since the start of the day following yesterday’s heavy drop as the market remains agitated over the outlook for demand and the global recovery, especially after the U.S. reported a strong buildup in inventories.

Crude oil is hovering around $98.35 at the meantime between the high of $99.70 and the low of $97.79. Crude is mixed as the sentiment remains jittery over the outlook for crude, as the downside pressures persist and investors consider yesterday’s drop was excessive.

Crude futures for June settlement ended yesterday lower by 5.5% to settle at $98.21 a barrel. Crude declined heavily after the EIA reported an unexpected strong rise in inventories which weighed on the market.

The U.S. commercial crude oil inventories increased by 3.8 million barrels from the previous week to  370.3 million barrels; meanwhile, total motor gasoline inventories increased by 1.3 million barrels last week, which is the focus now with the summer driving season on the doors and officially starts with the May 30 Memorial Day weekend.

We can see the volatility extending across commodities which is reflecting even bearishly on equities that trend lower amid a heavy commodities downside correction. The dollar is a big contributor at this time which rallied yesterday amid mounting fears that rising prices will derail the economic recovery.

The dollar index is hovering now around 75.29 down from the opening high of 75.39. The index settled yesterday strongly higher at 75.34 recovering from the low of 74.40. Europe’s debt crisis is a strong impute into the market which kept the euro also under heavy selling and fueled more dollar gains.

China, that reported strong inflation rise, is also feared from implementing further monetary tightening and accordingly choking crude consumption on slowing growth.

We can see the market very edgy and crude is trading with high volatility. Today heavy data is awaited from the U.S. and retail sales will be important to watch with the effect on the dollar and the effect on the sentiment and expectations for crude demand.

So far, the flooding along the Mississippi River has not affected crude, though started to support motor fuel as investors fear it will move towards refineries hub that will curtail production, which is also a new fact to keep an eye on. Crude was supported by those expectations in early trading yesterday but as the floods so far missed refinery hubs crude surrendered to the losses. 

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