| News | Crude heads for the $101.00 level on worries over Europe |
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| Analysis | Investors lost their appetite for risk and headed towards safe haven after amid worries the weakening German economy will drag the European Union into recession which could damage the global economic recovery. Although the German bond auction saw good demand today, while EU officials continue to meet trying to solve the debt crisis, the German Federal Statistics Office said that Germany saw contraction during the 4th quarter of 2011. Meanwhile, a separate report showed that Spanish factory output declined in Nov. by 7%, the most since 2009. As conditions in the euro zone continue to deteriorate, the outlook for the global economy is not promising. If stability will not be achieved soon, this means that global trade and demand on various commodities, including oil, will soften even more, especially since growth outlook is faltering in China as well. The worries over Europe's debt crisis, especially after Fitch said Belgium, Spain, Slovenia, Italy, Cyprus and Ireland remain on negative watch, suppressed the expected fall in the US crude stockpiles and the fears over Iran and Nigeria. Today, a nuclear scientist was killed in a bomb attack in Tehran, sparking concerns from a possible supply disruption. The tensions between Iran and the West continue since Iran refuses to abandon the nuclear program. And while the US and Europe prepare for more sanctions, Iran still threatens to shut down Strait of Hormuz. Now the US treasury Secretary Timothy Geithner is seeking to convince China to cut Iranian oil imports. Now investors eye the European Union meeting on Jan. 23 to decide on the oil embargo from Iran. Until then investors await the EIA crude oil inventories expected to fall last weak to 1.0MB from the previous week at 2.2M. In Nigeria the protests that started after the government removed the fuel subsidy escalated into religious conflicts, which started to threatening oil exports coming from Africa's biggest oil producer. As investors sought safe haven, the dollar index rose as of this writing towards the 81.35 level while the euro fell to 1.2685, increasing the downside pressures on commodities, where gold lost its gains trading now around the $1635.30. Oil is facing increased downside pressures as well, heading towards the $101.00 level from the highest today at $102.44. As of this writing crude oil is trading around $101.15, while Brent is trading around $113.11 per barrel. |
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