NewsOil is struggling to erase yesterday's losses
Previous
Forecast
AnalysisCrude oil declined yesterday after early gains on fears that spread in markets after S&P warned Euro zone nations that they might face a downgrade by placing them on a credit watch negative, where a downgrade may occur even for Germany if the EU leaders’ summit won’t be useful.

After crude took an upside journey it returned to join a downside wave due to S&P's move, which erased hopes that seen in Europe, as it warned the euro-area region’s nations with a possible credit rating cut in case European leaders fail to quell jitters and tackle the debt crisis during the coming summit this week.

Crude oil opened today’s session at $100.46 and reached so far a high of $100.94 after it recorded a low of $100.35, where it is currently trading around $100.71.

The agency also explained that European leaders must reach an agreement on how to solve the two-year debt crisis during the summit this week and it has placed the rating of 15 nations of the euro zone on a negative review, as S&P’s said systemic stresses are growing up.

On the other hand, the German chancellor and the French president would together push to remake the European Union into a more integrated political and economic federation, with tight legal restraints on how much debt national parliaments can issue.

Investors are so optimistic that leaders would indeed come up with a decisive plan to solve the debt crisis as financial markets are struggling to maintain stability, where crude is trying to erase losses recorded yesterday.

Iran and its oil production is the main factor that is keeping crude above the $100 level, as more sanctions from US and Europe on the country is threatening oil supply from OPEC’s second largest oil producer.

Analysts and economists expect that sanctions on Iran not to affect supply heavily for now yet other sanctions would drive oil prices higher than now to reach $250 levels, due to the rising risk of shrinking oil supply, tension remains high in the Middle East especially with the tension seen in Saudi Arabia and new protests in its oil rich region. 

Volatility will remain evident today and till the EU summit on Friday, as the summit is expected to present a decisive plan to solve the debt crisis, and hopes that they will do that are increasing amid signs from leaders especially Merkel and Sarkozy.

Volatility and fluctuations will increase today as the Euro zone will release its second reading for GDP in the third quarter, and it is expected to remain steady from the last reading that showed the economy is expanded by 0.2% on a quarterly basis.