|News||Crude oil declines as the European debt crisis deepens and the US economy weakens|
|Analysis||Crude oil fell today as investors bet that the European debt crisis may slow the economy crimping oil demand, in addition to the US economic weakness which dampened the sentiment which weighed on crude oil further more, pushing it to the downside.|
Light sweet crude oil for the month of August opened at $97.36 a barrel, recording the intraday high at $97.66 a barrel and a low of $96.93 a barrel and is currently trading around $96.88 a barrel.
On the other hand, the dollar maintained its upward trend after last week’s unexpected data from the U.S., that showed easing inflationary pressures, in addition, the Feds signaled that another round of quantitative easing is indeed an option although an unlikely one, which supported the dollar to rebound after the heavy losses recorded, also the concerns that the crisis is spreading pushed the dollar to the upside against the euro, limiting the appeal of commodities such as crude oil.
The USDIX opened today at 75.25 recording the highest at 75.60 and the lowest at 75.16 and is currently trading around 75.57.
In Europe, eight out of 90 banks failed the stress tests which were performed to determine if they could withstand a long recession, although expectations were that 15 banks or more will fall short. The results were better than the expected but the stress test failed to offset the broader gloom sweeping across the markets, especially that the European Finance Chiefs came to no agreement regarding Greece, and the IMF said that it’s not ready to discuss a new rescue package for Greece, and the country should focus at the moment on implementing the austerity measures and the possibility of applying more measures.
Angela Merkel the German chancellor called for private investors yesterday to make a major contribution in order to rescue Greece from falling in its debt, as pressure rose for a serious action to cut the country’s debt.
In USA, after Standard & Poor’s rating agency followed Moody’s warning it may cut the US AAA credit rating within 3 months saying that there is growing risk of policy stalemate on the agreement to raise the debt limit is further agony to the market as decision makers failed to reach an agreement over the weekend to raise the debt limit and prevent the nation from losing its top credit rating.
This week, the most important data will be related to the largest sectors in the economy as manufacturing and services advanced readings for July are due, the markets are expected to stay volatile in hope that any data will be released to comfort the situation in the markets especially with eyes at the Brussels summit on July 21.