|News||Crude declines pressured mainly by the U.S.dollar|
|Analysis||Crude oil is moving south at the beginning of the week amid escalating fears in Europe ahead of Euro zone finance ministers’ meeting on Friday. The ministers’ main focus is the firepower of the region’s bailout funds, which triggers volatility in financial markets with mixed expectations whether they will expand it or commit to the current 500 billion euro.|
Crude oil opened today’s session at $106.72 recording so far a low of $106.18 and a high of $107.02, where it is currently trading negatively around $106.18 a barrel.
Volatility dominates financial markets due to high uncertainty seen in Europe ahead of the finance ministers meeting which will start on Friday. Global leaders have pressured Europe to expand its stability funds in order to stem the widening debt crisis which affects the global economy.
It is expected that ministers would integrates the two bailout funds, the temporary and the permanent, into one fund raising the lending capacity to 940 billion euros. If that happens, the continent may be able to control its crisis and avoid the debt laden nations from an expected collapse.
The Italian PM warned that Spain may take the region back to the deep crisis as the country struggles to control it finances, where we can see obvious signs of recession in the region amid failure of debt laden nations to meet the austerity goals, where Italian and Spanish yields rose last week reflecting investors’ worries over these countries.
All these negative factors in Europe is pressuring crude at the beginning of this week after crude rallied last week on a report showed that Iranian oil exports will fall by 300 K barrels a day as a result to the tighter sanctions which triggered the country’s financial transactions, fueling supply worries.
However, Sudan has played a significant role in easing the pressure on global oil supplies, as south Sudan announced that it might resolve a dispute over oil and other outstanding issues with Sudan within a month or two, increasing the possibility of resumption in crude production from South Sudan.
In general, crude still trading among a range amid mixed factors, as fears over global supplies which took crude to these high levels have eased lately where uncertainty in Europe and weather it will resolve the debt crisis or not is triggering volatility in financial markets.
The current uncertainty is supporting the U.S. dollar, as investors are heading to the dollar as a safe haven amid current market conditions, which adds negative pressure on crude oil and pushing it to the downside, as the USDIX opened today’s session at 79.31 and rose to reach so far a high of 79.70 and a low of 79.26.
Dear reader, we expect that crude oil would be volatile today amid high uncertainty in Europe and lack of fundamentals from major economies. Eyes will be looking for comments from leaders over the ECO-FIN which may calm the market if they agreed to expand the firepower of the bailout funds.