| News | Crude oil gains amid hopes from Europe |
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| Analysis | Crude oil soared yesterday breaching above the physiological level of $90.00 backed by hopes from Europe that EU leaders emerged a comprehensive plan to solve the debt crisis and better than expected manufacturing data from China that pushed crude to the upside significantly. Crude oil for December delivery continued yesterday’s rally after it opened the session at $91.75 and reached so far a high of $92.58 and recorded a low of $91.08, where it is currently trading positively around $92.50. Investors are so optimistic over the European efforts that it would be able to contain the crisis and prevent it from spreading, and the plan that they would announce on Wednesday would be strong enough to extend the firepower of EFSF in an appropriate way along with the progress of recapitalization of European banks. The agreement between Merkel and Sarkozy helped investors to be optimistic again, as Sarkozy stated that they are finding a way together to extend the firepower of the EFSF, which hinted that leaders would come up with a comprehensive plan for the continent. We must point out to the inverse relationship between U.S. dollar and crude oil, where the U.S. dollar index that measures its performance against a basket of foreign currencies declined today and yesterday amid hopes from Europe and better than expected U.S. companies’ results, as it opened today’s session at 76.07 and recorded a high of 76.28 and reached a low of 76.02, where it is currently hovering around 76.11. On the other hand, the Chinese economy has released yesterday the HSBC Flash China Manufacturing (PMI) for October, where it showed an un expected expansion by 51.1 compared with the prior contracted reading of 49.9, which indicated that Chinese demand on crude oil will rise, where it is considered the world’s second largest oil consumer and increasing demand from there would absolutely drive world demand higher. We should not forget the Chinese role in the global recovery and how the global growth depends significantly on China, as it's considered the world’s second largest economy as well, and it is No.1 exporter around the globe, which made investors look carefully on their exports and economic activities to assess the outlook. However, the rise in crude oil it’s not confined only by these two major factors, but we can add the good results that released by U.S. companies and European companies that showed better than expected results despite the slowing global growth and deepening debt crisis in Europe, which relieved investors somehow. By collecting all these data, we can come up with a conclusion that global markets have seen a relief when an agreement among EU leaders and a comprehensive plan can be made to solve the crisis on Wednesday, which will continue this positive momentum until tomorrow’s summit which will define markets’ direction, where volatility may remain evident ahead of the summit. |
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