| News | Oil volatile ahead of debt auctions, rate decisions |
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| Analysis | Here comes the hectic day that investors are eagrly waiting for which will show the monetary stance for the two major central banks in Europe, alongside major bond auctions for the most monitored debt countries in the Euro area, where yesterday crude oil was affected by negative factors from the huge rise in US oil inventories. Mixed factors are affecting crude oil nowadays, but yesterday the negative effect from the rising US inventories won the fight to take oil down, but it couldn’t force it to decline below the physiological barrier at $100 due to the Iranian crisis which is keeping crude at its high levels now. Crude oil opened today’s session at $101.05 and recorded a high of $101.64 and a low of $100.88, where it is currently trading around $101.31. The EIA report showed that the U.S commercial crude oil inventories increased by 5.0 million barrels from the previous week. At 334.6 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year, where distillate fuel inventories increased by 4.0 million barrels last week and are in the middle limit of the average range for this time of year. Also, the strengthening US dollar added negative pressures on crude oil yesterday, as it rose significantly against the weakening Euro and sterling amid worries in Europe, as the bad data from UK pushed the pound to the downside, where the Euro declined amid leaders’ comments and other factors that dominated the currency’s trading, taking it to the downside. Nonetheless, today will define the direction for financial markets in the coming period, as the ECB and the BoE will announce their rate decisions and is expected to maintain their current monetary stance and may discuss the possibilities of stimulating the economy in their meetings, but it is not expected to announce any stimulus plans today. The rating agency Fitch, does not expect the French government to have to provide capital to bolster its banks, where the agency had warned Italy, Spain and other countries that there is a possibility to see a downgrade, but it excluded France and expected the country to keep its top rating. On the other hand, China’s Petroleum and Chemical Industry Federation estimated that apparent crude consumption will increase 5.3% (YOY) to 9.6 million barrels per day, compared with its forecast of a rise of around 3.5% in 2011, which is considered a huge amount from the world’s second largest oil consumer. China is the most benefited country from US and EU sanctions on Iran’s oil exports, as the country started to negotiate on cheaper oil from Iran, as U.S. begins work on imposing sanctions to complicate global payments for Iranian oil, Chinese refiners may be taking advantage of the mounting pressures, as China is demanding better terms and low prices on Iranian crude. And to remain in Asia, the South Korean vice finance minister said that the economy will probably be affected by increasing sanctions on Iranian oil exports and the country needs to diversify its oil suppliers. Volatility will be so high today ahead of these decisions and other major auctions, as investors are eagerly awaiting for the results of the Italian and the Spanish auctions which will be held by their governments today, and to see how is the demand on these bonds amid these critical conditions and would the borrowing costs decline or not. |
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