NewsEIA report
Previous-10.6 million barrels
Forecast-2.5 million barrels
AnalysisCrude oil retreated yesterday amid low volume of trading and after the ECB said that its balance sheet soared to a record after the lending operation that it took last week, and fears increased in Europe that the debt crisis will affect the global growth negatively.

Crude oil opened today’s session at $99.45 and reached a low of $99.23 and a high of $99.83, where it is currently trading around $99.55.

Crude oil is struggling today after it declined sharply yesterday on the ECB’s declaration of widening balance sheet, which means that banks didn’t act as the ECB wanted and the fear of not lending each other is still existed.

Noting that the ECB move last week by providing banks with unlimited cash, has pushed borrowing costs to the downside, as the Italian yields declined sharply yesterday in the first auction after the ECB’s operation.

On the other hand, the API reported an unexpected rise in Crude-oil supplies by 9.6 million barrels for the week ended Dec. 23, where gasoline inventories also rose by 1.9 million barrels, and distillate inventories added 554,000 barrels.

Let us not forget the effect of the US dollar, as it rose significantly yesterday which weighed crude prices taking crude to the downside, as the dollar rose amid high uncertainty at the end of the year and fears from Europe.

As the USDIX rose yesterday from the opening levels at 79.80 and closed the trading at 80.49 after it rose to a high of 80.60.

Today, Italy is willing to hold a bond sale auction for long term bonds after yesterday’s auction for short term, and is supposed to sell as much as 8.5 billion Euros for bonds that mature in 2014 to 2022, where hopes are seen in markets that borrowing costs would decline sharply after yesterday’s falling yields.

We can say that Iran is the main factor that is keeping crude oil on high levels despite yesterday’s decline which took crude below $100 levels but close to it, after it threatened to stop the flow of crude that passes by the Strait of Hormuz if imposed Western sanctions on its oil export would be implemented.

Although, the United States warned the Iranian government for such a move, which raised  tensions to spark military reprisals and spike oil prices to levels that are much higher than crude should be in the fragile global economy.

However, the EIA may report a further decline in US inventories by 2.5 million barrels after it declined sharply the previous reading by 10.6 million barrels, which reflects the rising demand from the world’s largest oil consumer.