Crude oil continues its decline this morning trading at 86.75 down by 23 cents as growth and recovery downgrades weigh heavily on the commodity. U.S. crude futures for May delivery closed down by $2.04 at $86.68 a barrel, down by 2.3% on Wednesday. Crude prices were down on concerns over weak global oil demand after the IMF cut its global growth forecast to 3.3%. The International Energy Agency said that falling crude prices was evidence that the oil market is well supplied, putting additional pressure on prices. However, crude inventories unexpectedly fell by 1.2M which prevented further downside in prices.
Oil prices have fallen almost 7 percent in the last five days on expectations of sluggish demand from the U.S. and China, the world’s two biggest economies. The price of Brent crude oil has tumbled 18 percent from a peak of $118 a barrel in February to below $98 this week. Weaker-than-expected economic data from the U.S. and China over the past week have heightened concerns that the global economic outlook is not as strong as many expected just a couple of months ago. But the fall in oil prices provides a silver lining, say analysts. Yesterday the US Fed Reserve released its “Beige Book” which reviews the state of the US economy and is a guide for the FOMC. The assessment released Wednesday said overall activity is growing at a moderate pace, which is better than the report six weeks ago in which the economy was growing at a “modest to moderate” pace. According to the report, most of the nation saw increases in manufacturing, though the labor market was either unchanged or improved slightly. There were reports of hiring in manufacturing, residential construction, information technology and professional services.
Oil’s fall comes as part of a wider commodities rout triggered by data released Monday showing growth in China, the world’s second-largest oil consumer, had slowed unexpectedly in the first three months of 2013.Brent crude futures for June delivery hit a low of $96.75 before paring losses to trade at $97.32 early on Wednesday, down 37 cents. Brent stretched its losses into a seventh session – its longest losing streak since October last year.
Oil prices were also under pressure given risk of political uncertainty in the euro zone, where Italy’s divided parliament begins voting for a new state president on Thursday, a crucial step towards resolving the stalemate since the inconclusive election in February and to carry on with fiscal reforms.Investors seemed to shrug off news of Shell declaring force majeure on Nigerian Bonny Light crude oil exports. The company said it was shutting down the 150,000-barrel-per-day Nembe Creek pipeline in Nigeria for repairs.The stronger US dollar is also weighing on prices as equity markets fell around the globe yesterday, traders moved to the safety of the US dollar.
Natural gas prices also eased to trade at 4.189 giving up 19 pips this morning as the dollar strengthened as traders sold off to book profits, with natural gas breaking above the 4.20 mark activating sell orders. U.S. natural gas ended higher as chilly weather forecast boosted the heating demand and supported prices. Inventories today are expected to be positive which could push prices down. However prices are likely to move in a range before the data. - FxEmpire
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