|Previous||-6.7 Million Barrels|
|Forecast||-1.3 Million Barrels|
|Analysis||Crude oil futures started the day in Asia with a choppy tight ranged trading, where the downbeat growth outlook weighed negatively on crude after the abysmal forecast from the IMF, yet support was still seen from easing Greek tension, expected inventories drop, and anticipated action from the Feds today.|
With the mixed sentiment and anxiety in the market, crude oil futures started the day with a cautious move ahead of a busy day of surprises. The November contract started the day at $86.51 a barrel recording the high of $86.89 and the low of $86.32 and currently trading lower by 0.23% around $86.72 and attempting to recover from the downside pressure.
Crude started to reverse lower after it recorded the highest in NY yesterday at $87.68 a barrel where the downbeat warning from the IMF that warned of the possibility for the U.S. and Europe to slip back to recession!
The IMF projects global growth to slow to 4.0% this year compared to 4.3% earlier projections while they revised their U.S. growth expectations to 1.5% from 2.5% projections in June and surely weighed negatively on crude on slowing demand expectations.
The warning from the IMF for the deteriorating situation in Europe and the downside pressure that will result if they failed to contain the crisis offset signs of hope over Greece, especially after they ended the second day of talks with international lenders and cited progress in talks over the next aid loans and new bailout.
Still, the fear of the slowing growth and the fragile sentiment over the crisis in Europe remains the market mover for now, where that is reflected negatively on investors and surely commodities and a sensitive growth assets such as crude.
Weakening demand prospects for crude are keeping the commodity locked below the critical $90 a barrel barrier, which in role is favoring the bearishness as far as the safeguard resistance is intact.
Investors are hoping for solid action from policy makers, and especially central bankers as governments are strapped with demanding fiscal obligations and left the dirty job of stimulating growth to the banks. The eyes are on the Federal Reserve today and whether they are going to announce new strong measures to support the recovery.
Trading till the final decision will remain choppy, especially as the EIA report is also another chapter of volatility for Crude. The API reported an unexpected increase in crude oil inventories yesterday which further dimmed the expected drop in inventories from the EIA report.
Data from the EIA is expected to show a drop of 1.3 million barrels in crude oil inventories following the previous week’s strong drawback of 6.7 million barrels. The decline in reserves will surely support crude yet the effect is starting to wane as the pressure from the hurricane season starts to decline and inventories buildup will return as consumption continues to weaken.