| News | Crude oil fluctuates heavily on mixed sentiment |
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| Analysis | It is a busy day for crude and the mixed sentiment is evident on crude that fluctuated between gains and losses on Thursday and now biased south with fear evident on Europe and also on reports that Muammar Gaddafi was killed. Crude oil turned lower into the U.S. session despite encouraging manufacturing data, as the overall sentiment remains shaky amid growing signs of disagreement among European leaders that suppressed hope the coming summit would present a sustainable plan. Crude oil futures for December settlement are currently hovering bearishly around $85.74 a barrel down 0.43% from the opening of $86.10, recording the high of $86.94 and the low of $85.27 a barrel. The market is reacting cautiously and with heightened anxiety as mixed reports from Europe further complicate the situation and dim hope for a roadmap to be presented in the weekend, especially that some reports suggested that Germany might postpone the anticipated October 23 summit. The leaders are at odds over how to expand the firepower of the EFSF, where a slight positive recovery was seen earlier in the European session on a guideline obtained by Reuters saying the EFSF would purchase bonds from nations and the secondary market and another saying it will provide loans to nations to capitalize banks. Nevertheless, the recovery was very limited as soon as investors realized it did not present anything new from the already agreed upon reshaping of the EFSF powers back in July that member states already ratified, as it did not answer the question of how the firepower will be expanded and whether leveraging the fund is considered. France is clearly at odds with Germany and the ECB as the nation is pushing for the EFSF to be turned into a bank model that can access ECB funding and that is clearly a rift in agreement that will surely not yield and agreement this weekend. This mixed outlook for the finance ministers meeting tomorrow had its toll on markets and accordingly on crude oil that remained soft against the strong dollar as investors avoid risk with the mounting uncertainty. The USDIX is currently trading at 77.32 higher by 0.34% after opening at 77.04 and recording the high of 77.44 and the low of 76.71. The slight upbeat news for today was the unexpected improvement in the Philadelphia manufacturing index that leaped to expansion in October as the index rose to 8.7 from -17.5, the first positive reading in three months, which is a sign that the economy is still fighting back its way from entering recession and that might ease the gloom over crude demand outlook. Expanding manufacturing was downplayed by the reported rise in jobless claims and the drop in existing home sales, which assures that the economy is far from stable still. We can still see crude heavily affected by the overall negative and weak sentiment, and further downside strain is seen from news that former Libyan leader Former Libyan leader Muammar Gaddafi died on Thursday which might be the beginning of the end of fighting in Libya and the start of stability that will further restore crude production to normal levels. The news were not till now of a strong impact on crude since Libya already started to restore production yet we can see it still as downside pressure over the coming period. More volatility is expected with eyes still on Europe and on Wall Street today ahead of the euro finance ministers meeting tomorrow that might give clues for the market ahead of the end of the week’s trading which will see volatility especially as investors are uncertain now what the summit might result and accordingly investors will tend to close any open positions and avoid taking more risk with this high uncertainty. |
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