News | Crude declines on the negative sentiment |
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Analysis | Crude oil declined at the beginning of the week’s trading amid deepening European debt concerns, and fears over the ability of the Euro area to contain the crisis from spreading to other debt-laden countries such as Italy and Spain, which are considered too big to fail. Euro Zone leaders are struggling to contain the crisis, as they concerned much more from the the effect on other debt laden countries and the contagion spread and not just Greek default, where the consequences would be huge on debt laden countries and they may fall like a domino. On the other hand, most of the world leaders urged Europe to do more in order to contain the crisis, and accordingly they are considering to expand the Euro rescue fund to keep the Euro countries afloat. Oil for November delivery is currently trading around $78.80 a barrel after recording a high of $80.82 and a low of $77.12 since the opening price at $79.70 The dollar has a major negative effect on crude prices, where it rose today at the beginning of the week, which put more negative pressure on crude, as it opened the session at 78.12 and reached the low of 78.06 and then it rose to record the highest of 78.85. The spot light now is on Europe, Greece and what are the contagion risks, shifting from the United States after they disappointed investors with 400 billion dollars plan to support the U.S economy, and mentioning that there is “significant downside risks” on the economic outlook, which caused a panic sell-off around the world. The sentiment remain weak around the globe, with a general slowdown in the global economy along with a fragile recovery pace, as data from major economies showed last week a contraction in the Chinese manufacturing followed by Euro zone manufacturing and services contraction. All in all, the data that released from majors economies along with a worsening debt crisis in Europe are considered negative factors that affect crude oil negatively and put more downside pressure on the commodity, as world demand on crude is weakening and below expectations due to factors we mentioned, also demand on crude is expected to slow in the future, amid slowing economies around the world. Fears are dominant in markets over the global economy, as many economists are seeing the world economy is heading into another recession amid the worsening debt crisis in Europe, and a slowdown in the U.S growth, which means the key economies are not doing well. The negative pressure will remain pushing crude oil to the downside unless we see optimistic data that relief investors, but with the lack of fundamentals we may see choppy trading and uncertainty evident in markets for the rest of trading today. |
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