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| Analysis | Crude oil fell for the third day on Friday trading, reaching the lowest level in one month, despite the announcements by the G20, drop in dollar and rebound in equities. Oil for November delivery is currently trading around $79.35 a barrel after recording a high of $81.75 and a low of $75.54. It seems that oil prices are negatively affected by the negative sentiment spreading in markets after the dovish announcements by the Fed Chairman, weak fundamentals from major economies, escalating European debt woes and sharp rise in the greenback. Prices could not benefit from the the Group of 20 Chiefs pledge to coordinate their efforts to combat the crisis. They vowed a “strong and coordinated international response to address the renewed challenges facing the global economy,” where they also vowed to help in easing pressure on European banks. The announcement by the G20 helped shares to recover some of the losses incurred this week. However, on the other hand, Moody's downgraded eight Greek banks to add to worries that European debt crisis are intensifying. On Tuesday night, the Fed Chairman, Ben Bernanke, said there are “significant downside risks” to the economic outlook of the U.S. and said the Fed would sell $400 billion of short-term securities and buy an equivalent amount of long-term securities to reinvigorate the economy. Bernanke's announcements were translated negatively by investors, pushing shares to the downside and enhancing demand on the low-yielding assets. The bearish announcements by Bernanke along with the lackluster reports from major economies increased expectations that global recovery is faltering and future demand oil would decline. Furthermore, the EIA report released on Wednesday showed that the U.S commercial crude oil inventories decreased by 7.3 million barrels from the previous week. Total motor gasoline inventories increased by 3.3 million barrels last week and are upper limit of the average range. Distillate fuel inventories decreased by 0.9 million barrels last week and are in the upper limit of the average range for this time of year. In the FOREX market, the dollar took advantage of the tensions over the week yet it dropped today after the G20 announcements. The dollar index, which tracks the dollar movements versus a basket of major currencies, edged down to a low of 77.94 compared with the day's opening level of 78.42.
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