NewsCrude oil is trading within a narrow range after Moody's placed the US credit rating under review
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AnalysisCrude oil is trading within a narrow range, although its still trading near its highest levels in four days, crude oil eased today after Moody’s decision on placing the US credit rating under review which fueled concerns into the markets that the US demand on oil will be tempered in the world’s largest oil consumer, and also the effect of the EIA report is still seen in the markets in addition the weak dollar which supported the oil further more.

Light sweet crude oil opened today at $97.90 a barrel recording the intraday high at $98.49 a barrel and a low of $97.48 a barrel and is currently trading around $98.47 a barrel.

The Dollar Index that tracks greenback’s performance versus its six major counterparts, is still affected by Bernanke’s semi-annual testimony yesterday and is resuming its downward trend, where he reassured markets that pace of recovery shall be picking up in the upcoming quarters where the country will hopefully witness advanced growth rates, as Feds expressed its fully readiness to run further stimulus, while Bernanke saw late inflation hike to be temporary.

The USDIX is currently trading around 74.98, from the opening of 75.14 recording the highest at 75.20 and the lowest at 74.64.

Moody’s said in a statement yesterday that the US rating would likely be reduced from Aaa to Aa, placing the US credit under review for a downgrade which added more pressure on the US government to raise the debt limit which is currently at $14.3 trillion, the thing that stoke speculation that an economic slowdown may temper the demand on oil from the world’s largest oil consumer.

The EIA report yesterday said U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.1 million barrels from the previous week. At 355.5 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year.

Returning to Europe, the debt crisis is still the main issue in the markets as the crisis has not been resolved yet after the EU ministers meeting which resulted in empty promises for cheaper loans and longer maturities and more flexible rescue fund, but nothing has been done so far.

With the worsening fears that Italy will be the next victim and Moody’s decision to cut Ireland’s credit rating to junk status the markets will remain jittered until the EU take new decisions regarding the Greek tragedy especially after the world’s lowest credit rating was confirmed for Greece once again after Fitch downgraded Greece’s credit rating by three levels following the move of other rating agencies.