|Analysis||Crude oil fell for the second day on Thursday trading, reaching the lowest level in two weeks, as the dovish announcements by the Fed Chairman yesterday added to concerns, thereby increasing speculations that the demand on oil would decrease from the world's no.1 oil consumer. |
The Fed Chairman, Ben Bernanke, said there are “significant downside risks” to the economic outlook of the U.S. and said the Fed would sell $400 billion of short-term securities and buy an equivalent amount of long-term securities to reinvigorate the economy.
Bernanke's announcements were translated negatively by investors, pushing U.S. shares to the downside, where Asian equities also showed decline today.
This week, the IMF cut its global growth forecasts for this year and next; the IMF said the world economy will expand 4% in 2011 and 2012, below June forecasts of 4.3% and 4.5% this year and next.
By the same token, data released this week added to worries that the sluggish growth pace would continue. German investor confidence slipped to 2 1/2 year low and U.S. housing starts touched the lowest level in three months, where today euro area manufacturing and services for September may confirm that the sluggish growth pace is continuing strongly in the third quarter.
Moreover, the EIA report released on Wednesday showed that the U.S commercial crude oil inventories decreased by 7.3 million barrels from the previous week. At 339 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories increased by 3.3 million barrels last week and are upper limit of the average range. Distillate fuel inventories decreased by 0.9 million barrels last week and are in the upper limit of the average range for this time of year.
In the FOREX market, the dollar took advantage of the tensions to advance as investors resorted to the greenback as a refuge, adding more pressure on dollar-denominated commodities.
The dollar index, which tracks the dollar movements versus a basket of major currencies, edged up to a high of 78.05 compared with the day's opening level of 77.79.
Oil for October delivery is currently trading around $85.66 a barrel after recording a high of $87.44 and a low of $84.81.