NewsCrude oil trading with heavy volatility ahead of the euro area summit
AnalysisCrude oil is trading with strong volatility today as the drop in the US crude inventories pushed oil to the upside while signals from China -the second largest oil consumer- that the manufacturing may have contracted for the first time in a year according to preliminary PMI index weighed negatively on oil, while choppy trading prevail as investors eye the Brussels summit. 

The volatility will be dominant in markets today ahead of the emergency Brussels summit which will determine the fate of Greece and the financial stability in the euro area, in addition to the key fundamentals which will be released today from the world’s largest oil consumer.

Light sweet crude oil opened today at $98.31 a barrel recording the intraday high at $98.79 a barrel and a low of $98.04 a barrel and is currently trading around $98.32 a barrel.

The dollar is still weakening versus the other currencies as investors are tending towards high-yielding assets. The USDIX opened today at 74.83 recording the highest at 74.86 and the lowest at 74.52 and is currently trading around 74.72.

EIA report which was released yesterday showed that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 3.7 million barrels from the previous week. At 351.7 million barrels, U.S. crude oil inventories are in the upper limit of the average range for this time of year, which supported the oil yesterday to rise.

On the other hand, China’s manufacturing may contract for the first time in a year as new orders and output drop according to preliminary PMI Index as the gauge fell to 48.9 from 50.1 in June. But the final July reading is due Aug, and this caused a drop in the crude oil as china’s demand for the crude oil may decline.

In the United States, president Obama said that there has been “some progress” regarding the raise of the US debt ceiling before the appointed deadline which is August 2 and that brought some hope into the markets especially after a group of Republican and Democrat senators offered a plan that could revive the US debt talks and a reduction of a long-term deficit reduction in order to avert a default by the US.

Today the US will release the initial jobless claims for the month of july where is expected that the claims increased from 405 thousand the previous week to 410 thousand claims and the leading indicators for the month of June are expected to drop to 0.1% from the previous 0.8%.

Returning to Europe, volatility and jitters are dominating the markets, yet fears slightly eased ahead of the Euro area leaders’ summit in Brussels as investors start to see the possibility for the leaders to come to an agreement regarding the Greek bailout. Greece’s Finance Minister, Evangelos Venizelos said a solution is “attainable” at the summit which will also discuss the financial stability of the euro area. 

German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed on a joint position to solve Greece’s debt crisis in order to prevent the country’s debt crisis to spread into other European countries and the rest of the details will be released today when euro region leaders meet in Brussels, the governments said in a statement after hours of talks in Berlin.