Fundamental Oil Report (2012-04-19)
|News||Crude consolidates after yesterday's sharp decline|
|Analysis||Crude oil declined sharply yesterday on rising U.S. oil inventories for the fourth consecutive week signaling that demand in the world’s biggest oil consumer is getting weaker every single day. However, the commodity fluctuates today ahead of the sentiment test that would be implemented by Spain in today’s long term auction.
The black gold opened today’s session at $104.26 recording a high of $104.48 and a low of $102.17, where it is currently hovering around the opening level.
Crude joined a downside correctional wave yesterday which been reinforced by the EIA report that showed U.S. oil inventories rose for the fourth consecutive week by 3.9 million barrels from the previous week. While distillate fuel inventories decreased by 2.9 million barrels last week.
All factors we saw yesterday were negative on crude and forced it to decline sharply, as signs of weakening demand from the world’s biggest oil consumer were the main factor. However, the easing pressure on global oil supplies was strong as well to push crude downward.
As the Joint Organizations Data Initiative (JODI) said that Iran has produced 3.752 million barrels a day in February, marking the highest output since December 2008, which means that tightening international sanctions have no impact on Iranian crude exports.
On the other hand, the IEA said in its April 12 report that sanctions on Iran could affect its oil output and it could plummet to 2.6-2.8 million barrels a day by mid-summer, unless alternative buyers can be found. Actually it seems that Iran has already found alternative thirsty buyers for its oil.
This downside pressure on crude might be limited today, as we can see some positive factors that halt this downside wave for crude, as the International Monetary Fund (IMF) said that it had raised $320 billion so far to boost its firepower in a way to fight the euro zone debt crisis, with Poland and Switzerland joining the effort.
This report from the IMF was encouraging and eased the tension over the Euro outlook, especially with the current expensive borrowing costs on some countries that renewed the contagion fears in the region. However, today is the hardest test for Spain at this conjuncture as the country will hold a 10-year bond auction.
The auction will be closely monitored as it will reflect how investors predict for the Euro fourth largest economy in the future amid deteriorating economy and rising outside debt. Volatility would sweep the market ahead of this test especially that the European economic calendar is empty.
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