|News||Crude holding its gains on eased woes|
|Analysis||Crude holds its gains amid a strong correction for commodities on the back of easing jitters and upbeat outlook for demand which is bolstered further by the weakening dollar.|
Crude oil futures for July settlement continued to hover stronger this morning and currently trading around $101.28 a barrel down from the high of $101.88 and still above opening levels of $101.17 and low of $101.10 a barrel.
Oil was supported by the reported a rise in gasoline demand yesterday in the United States. The EIA reported a buildup in crude inventories by 0.6 million barrels and 2.8 rise in gasoline inventories, yet demand on gasoline rose 2.2% which was supportive to the market with the official start of the driving season in the U.S. in this Memorial Day Weekend.
Crude found support from the weakening dollar on the back of eased jitters in the market, which accordingly suppressed haven demand. The dollar index is currently trading bearishly around 75.58 recording the high of 75.97 and the low of 75.47.
The eased jitters came from Europe and the rally for the euro which pressured greenback south alongside rising commodities and equities. The euro is trading higher versus the dollar at $1.4166 recording the high of $1.4195 from the low of $1.4067.
Support was seen after the European Commission raised 4.75 billion euros in its second bond issuance this week, as they sold five year debt to fund the bailout for Portugal. The Commission said that the “proceeds will be provided as a loan under the European Financial Stabilization Mechanism (EFSM), to be disbursed to Portugal on 1 June 2011.
Further sentiment support was seen from reports that China is interested in the coming auction of EU bonds for the Portuguese bailout. The Financial Times said on Wednesday the Chinese government and other Asian investors are expected to be “strong portion” of buyers for the Portuguese bail-out bonds with the European Financial Stability Facility (EFSF) begins auctioning them in June quoting senior fund officials.
Asian stocks today supported the ripple effect of the upbeat sentiment and rose on the back of rising commodities. After Goldman Sachs recommended buying commodities the support now came from Deutsche Bank AG that said oil prices will probably climb.
Investors are not as bearish as they were the past two weeks on commodities and the jitters over the outlook for the recovery have not evaporated, yet surely eased. The Organization for Economic Cooperation and Development (OECD) in its 2011 Economic Outlook did say that the recovery is still facing challenges yet maintained its projections for 4.2% global growth this year and even raised U.S. growth to 2.6% from 2.2% estimate in November which is surely positive for the demand outlook on crude.
The fluctuations for crude will continue today with the lack of data from Europe ahead of the preliminary first quarter GDP estimate from the United States today that is expected with an upside revision, supporting crude’s gains.