NewsOil heading upwards despite downgrades in Europe
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AnalysisCrude oil is rising for the second consecutive day despite the debt crisis in Europe and downgrade moves from the beginning of the week; the effect from Iranian is stronger than any other factor and continue to push crude upwards.

Crude oil opened today’s session at $99.62 and reached so far a high of $100.68 and a low of $99.32, where it is currently trading around $100.60, and we can notice how the dollar declines sharply today supporting crude indeed, as it opened the session at 81.42 and reached so far a low of 80.89.

Standard and Poor’s has downgraded the credit rating for nine European nations including France, Austria and Italy and it didn’t stop there, the agency also downgraded the credit rating for the Euro zone financial stability fund the EFSF signaling that after the downgrade for these nations that support it, it will not be as efficient as before.

Despite that, the market sentiment remained neutral but not as negative as expected, as the downgrade move for the fund was expected after the agency announced last year that if any downgrade occur for a supporting nation for the fund will be reflected on the fund’s rating.

Although, crude oil and other commodities have neglected this discouraging move and continued the upside journey taking its momentum from other factors mainly from the Iranian issue which used to give crude an upside momentum despite slowdown’ signs in Europe.

The Saudi oil minister raised the tensions on oil market, as he said that his country will inject more crude oil and increase oil production if there is a need for that, and Saudi Arabia wants to stabilize crude prices around $100 level this year; however, his comments were inconsistent with Iran’s position as it warned gulf nations not to cover the shortage of oil supplies due to the US sanctions on its oil exports.

South Korea one of the U.S. allies warned the United States that such a move of banning the Iranian oil exports and sanctions on it will indeed push oil significantly higher as it is hard to find oil sources to replace Iran.

The Organization of Petroleum Exporting Countries (OPEC) maintained its oil demand forecasts in 2012, but it said “If Europe’s turmoil were to worsen, the effect on the oil market could be seen not only through a further decline in oil demand in Europe, but also with spillover effects on oil demand in the emerging economies”.

China, the world’s second largest economy grew 8.9% in the last quarter of 2011 higher than expectations but it is the weakest pace of growth for two and a half years.

All in all, volatility will be high today ahead of major debt auctions would be held in Europe alongside key confidence data from the euro zone and manufacturing figures from the United States that joins the market after a long weekend and that will also be more reason for heavy fluctuations.