Yesterday, the dollar was gaining some grounds as US Treasury Secretary, Paulson, announced the blueprint trying to revive the US economy by improving the financial sector after the crisis that reflected the disturbance within.
As Paulson spoke the dollar started to appreciate while the US stocks gained some of their losses. Crude shed $4.04 per contract as it lost its ground in front of the strengthening greenback. Since crude oil is a hedge against the falling dollar and inflation, that was originally supporting the incline in prices. Also in the market we witnessed a massive amount of profit taking while crude prices plunged. The contract closed $101.58 after reaching a high of $106.78 per barrel and touching the low of $100.25 per barrel.
There is still dampened demand for oil by the world's largest crude consumer, the US, as they are suffering from recession and dampened demand from them in addition to fears of effect from a global slowdown is forcing crude prices to continue declining. The current market sentiment for crude is bearish as the latest US economic data was released showing further proof of recession and fears that the crisis is to prolong as long as the financial sectors suffer and the housing market haven't bottomed up.
Another support to dipping crude oil prices is eased up tension in the Iraqi region, Al-Basra, between the government and militants of El Mahady. In addition to that supply disturbance agony from Iraq is gradually resuming to normal capacity which lids concerns about adequacy of supply in the market once more leaving the focal concern on dampened demand prospects. Today crude contracts for May delivery opened at $101.57 while recording a low of $101.26 per barrel and a high of $101.80 per barrel.
Crude prices on the short-term will continue to decline as it is continuing the downside correction, but if it breaches below $100 per barrel it will continue to slip. On the medium to long term the general trend is still to the upside; for that investors wait around patiently trying to define the upcoming wave in the marketÃ¢â‚¬Â¦