NewsCrude oil struggles at the beginning of the week
AnalysisCrude oil struggles amid mixed factors that affecting it, where the downgrade moves in Europe have added fears into global markets and hit the confidence among investors, which countered the effect from the Iranian issue which played a great role in keeping crude above $100, however, the effect of downgrade move won in putting crude below this level.

After S&P move, financial markets have seen a pessimistic trading as it hit the confidence in Europe and drove fears upwards, where investors are afraid of deepening debt crisis and if countries are capable of getting out of this crisis, but downgrade move is hurting economy indeed.

Crude oil opened today’s session at $98.92 and recorded a high of $99.42 and a low of $98.59 where it is currently trading around $99.41.

Standard & Poor’s stripped France and Austria of their top triple-A rating alongside other seven nations in the euro area acting on its December warning and dismissing some comforting signs from Fitch earlier last week that France might be safe from downgrades this year.

Although, before this downgrade move, the Iranian issue used to drive crude oil upwards neglecting any signs of slowdown in Europe or any signs of deepening debt crisis in the continent, but this downgrade has beaten the effect from Iran and put crude below $100 levels.

Last week, the United States said that it would isolate the Iranian central bank and three of largest oil customers Japan, South Korea and China for Iran, getting assurances that Saudi Arabia and other Gulf countries would help to cover any shortage in supplies if they stopped any oil exports from Iran.

The situation between Iran and the west is getting worse, which increase the fears over global oil supply if the problems intensify between the parties, Iran warned Arab oil producers against boosting production to offset any potential drop in its crude exports if an embargo affecting its oil sales, as US is willing to put hard sanctions on Iran’s oil exports to discourage the country from its nuclear program.

On the other hand, UK’s foreign minister said that European nations will intensify pressure on Iran over its nuclear program, but insisted the West wasn't pressing for military action, where he prefer finding a peaceful methods of persuading Iran to back off on its nuclear weapon.

The Britain foreign minister’s statement came after the European Union said before that it will delay the decision of banning the Iranian crude exports for another six months, in order to ensure that several countries in EU such as Greece, Italy and other debt laden nations would find another source of supply.

All in all, volatility will be so high in today’s trading as the United States is not the game today in its Martin Luther King Day, which will give space for markets to be affected by any minor factor, where pessimism is dominating the financial markets.

Crude oil will fluctuates heavily today as we said amid the absence of US, where markets are awaiting for comments from European leaders on the crisis and on the downgrade move, which increased pressure on leaders ahead of the summit which will take place at the end of the month.

Also, the French government will hold a bond auction today, as it will sell around 8.7 billion Euros of its short term bonds, where it may pay more yields on its bonds after it been downgraded yesterday by S&P, but it is not expected to see big rise in yields because the downgrade was for its long-term debt.