|News||China pressures crude lower over growth fears|
|Analysis||Crude oil is trading lower today amid growing signs of weakening Chinese growth which may curb fuel demand from the world’s second largest oil consumer. The country’s manufacturing sector continued to contract in March forcing the commodity to decline despite the upside momentum derived from declining U.S. oil inventories.|
Crude oil opened today’s session at $106.85 recording so far a low of $106.01 and a high of $107.10, where it is currently trading negatively around $106.05 a barrel, where the USDIX rose to the highest at 79.84 from the opening level at 79.59.
The commodity retreated in Asian trade today affected mainly by negative signs from China, the world’s second largest economy and oil consumer. The HSBC Flash manufacturing PMI in March showed that contraction deepened for the fifth consecutive month as the index fell to 48.1 compared to the previous 49.7.
The effect from the negative Chinese data was strong enough to force the commodity to decline despite other positive factors that are supposed to keep the upside rally dominant. Eyes nowadays are headed towards the Chinese economy waiting for any positive sign that could improve the outlook for the economy.
China recently cut its growth forecasts for the current year 2012 to 7.5% amid weakening global economy and debt crisis in Europe, and due to the important role that China plays in global growth pace, the Chinese economy is closely monitored at the current time.
The downbeat data from China offset the unexpected drop in crude inventories in the United States that managed to uplift oil yesterday. The EIA reported an unexpected decline in U.S. oil inventories by 1.2 million barrels in the previous week compared to the previous reading which showed a rise by 1.8 million barrels, where the report was expected to show a rise by 2.2 million barrels, and distillate fuel inventories increased by 1.8 million barrels.
Dear reader, the EIA report has shocked the market yesterday when it reported shrinking U.S. oil inventories, which pushed crude upwards beating all global efforts to halt this general upside rally for the commodity.
However, it is obvious that crude lost this upside momentum quickly, as we can see it now declining, losing all gains recorded yesterday. This is only a normal action for crude, especially after the main factor that was behind high oil prices subsides, as tensions ease between Iran and the west to exclude any military action at the current time.
Most likely crude will continue this downside trend amid factors that are pushing crude negatively, as we can see how the dollar is getting stronger today adding negative pressure on the commodity, and all world leaders are taking measures to put back crude in its reasonable levels without affecting the global economy which if crude stayed amid high prices it will be affected negatively.