|Analysis||Crude oil rose today ahead of the EIA report which is expected to show a drop in oil inventories by 2.5 million barrel, which pushed oil prices to the upside, and the expected improvement in the United States labor sector, as the ADP is expected to show 70,000 added jobs compared to the previous 38,000, ahead of the NFP tomorrow. |
Eyes today will be on the European rate decisions, as the BoE is expected to keep rates unchanged due to the slowing growth that is seen in the country, while the ECB is expected to raise the interest rates as it promised in the last meeting when Trichet said the infamous word “strong vigilance”.
The main factor today that will affect the markets is the press conference for Trichet which will be after the rate decision, and the focus will be on his comments over the borrowing measures and if they will reconsider these measures and the collateral accepted amid the wave of downgrades from rating agencies, also, if he will talk about the Greek situation and about Portugal which joined Greece after the downgrading from Moody’s for Portugal rating to the junk status.
Light sweet crude oil for August opened today’s session at $96.92 a barrel, recording the intraday high at $97.60 a barrel, and the low of $96.85 a barrel, where it is currently hovering around $97.44 a barrel. On the other hand, the USDIX index that tracks the dollar movements against a basket of major currencies, opened today’s session at 75.02, recording the intraday high at 75.17 and the low of 74.90 and is currently trading around 75.05.
Crude oil dropped yesterday after China raised its interest rates and a strengthening dollar pushed commodities to the downside after Moody’s decision which increased risk aversion. Increased fears about the global economic recovery and the weak ISM services in the United States also indicated economic growth is slowing and further weakened crude.
China’s central bank decided to raise its interest rate by 25 base points for the third time this year as inflation remains a top priority in China where it rose by 5.5% in May, the most since July 2008. This decision triggered worried about a possible slowdown in the Chinese economy, the world's second largest oil consumer.
The American petroleum institute released its report yesterday and showed a decline in the stockpiles by 3.2 million barrel which offset the downside pressure on crude and paved the way for more gains today with the expectations for a drop to be reported by the EIA of 2.5 million barrel.
Oil will keep fluctuating before the rate decisions and the EIA report which will move the oil prices significantly.