The US economy is still not recovering from roaming recession as a result of the housing sector which has been in a price plunge for two years till now dragging the greenback to a severe point. The dollar is depreciating more and more as global investors fear the slowdown of the global economy. As oil is bought and sold in dollars, it is cheaper for foreign investors to trade. In addition to foreign investments, crude is known to be a hedge against inflation on the producer price level.
With all the funds pouring into the oil market, crude is soaring again hitting its all time highs. Yesterday, the contract gained $0.41 to close at $110.33 per barrel reaching a low of $108.76 per barrel and a high of $110.00 per barrel.
As the Feds are hoping that their interest rate cut on Tuesday will rebound the economy, investors wait around confused by the uncertainty of where the economy will head. Today, oil slightly declined as there is excess supply and weakened demand while speculators still have the last word. The crude market opened at $110.24 per barrel reaching a low of $109.60 per barrel and a high of $110.24 per barrel.
The EIA report on Wednesday showed that the US commercial crude oil inventories rose by 6.2 million barrels compared to the previous week. At 311.6 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Total motor gasoline inventories increased by 1.7 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and gasoline blending components inventories increased last week. Distillate fuel inventories decreased by 1.2 million barrels, and are in the lower half of the average range for this time of year.
The weak greenback is still dominating the markets as the dollar backed commodities are gaining momentum due to the shifts of investments... For that oil markets remain highly volatile until the dollar trend clears in jittery markets.