Crude Oil remains weak on Escalating Eurozone Debt Crisis & Weakening Fuel Demand – Gets Support on Lower than Expected Stockpiles & renewed Supply Disruption Concerns from the Middle East. Weaker Equity Markets and a stronger US Dollar pressured prices early in the day.
Crude Oil slumped to its lowest close in almost eight weeks, but seems to rebound as investors speculated that recent losses were exaggerated. In the past 10 weeks, big speculators and hedge funds had added nearly 100,000 net long positions, equivalent to 100 million barrels, in US Crude Oil options futures contracts. It was one of the biggest and fastest such build-ups since 2010. Last week’s slide in Crude Oil to over 7% was enhanced after a Gulf source said Saudi Arabia would act to lower prices that hit four-month peaks. I hold the view that the huge longs (including Hedge Funds) build up in Crude Oil Futures around the timings of these Quantitative Easing announcements, made them sitting ducks for a sharp & sudden manipulated blow in the opposite direction. Crude Oil has more reasons to rise than to Fall & I expect Crude Oil to soon resume its ideal course, as also explained earlier in the article: Crude Oil Slumps on Stockpile Rise & China Manufacturing Data. Crude Oil for November delivery on the NYMEX – New York Mercantile Exchange yesterday fell $1.39 to $89.98, the lowest close since Aug. 2. Brent Crude Oil for November settlement rose 35 cents, or 0.3%, to $110.39 a barrel on the London-based ICE Futures Europe exchange.
Crude Oil is obviously under pressure as a result of what’s happening in Europe. Uncertainty over a bailout for Spain while Eurozone policymakers still wrangled over Greek’s debt highlighted the difficulty Europe is facing in tackling the crisis, weighing on broader markets, from Asian shares, the Euro to Gold. Crude Oil Prices slid 1.5% yesterday, the seventh decline in eight days, on concern the Eurozone debt crisis will worsen and derail the global economy. Spaniards held protests and Greeks staged a general strike to oppose austerity measures. Prices fell yesterday as protesters in Spain marched for a second night in Madrid, calling on Prime Minister Mariano Rajoy to reverse austerity measures as his nine-month-old government prepared its fifth package of budget cuts. The nation’s 10-year bond yields rose above 6%, approaching the levels seen before European Central Bank President Mario Draghi offered to buy struggling nations’ debt. Schools, hospitals, ferries and government services shut down in Greece yesterday in the first walkout since February. Thousands of protesters streamed into the central Syntagma SquareinAthens, opposite the Parliament House. The government is planning an austerity package that Prime Minister Antonis Samaras says is vital to keep the nation in the euro area.
U.S. fuel demand fell in the past four weeks, an Energy Department report showed. U.S. total fuel use decreased 1.1% to 18.4 million barrels a day, the lowest level since April 6, in the four weeks ended Sept. 21 and crude stockpiles last week were at the highest level for this time of the year since 1990, according to the Energy Department report. U.S. Crude Oil production surged last week to the highest level since January 1997, reducing the country’s dependence on imported fuels as new technology unlocks crude trapped in shale formations. Crude Oil Output rose by 3.7% to 6.509 million barrels a day in the week ended Sept. 21, the Energy Department said. The nation met 83% of its energy needs in the first six months of the year, department data show. Imports have declined 3.2% from the same period a year earlier.
Crude Oil inventory and refined product stockpiles in US – the world’s biggest oil consumer fell unexpectedly last week as crude imports plunged. Crude Oil stockpiles fell 2.45 million barrels to 365.2 million, the report showed. They were forecast to rise 1.9 million, according to a Bloomberg News survey. Gasoline stocks dropped 481,000 barrels last week, the Energy Department said. They were projected to gain 500,000 barrels, according to the median estimate of 11 analysts in the survey. Distillate inventories, a category that includes heating oil and diesel, declined 482,000 barrels compared with a forecast 500,000 barrel increase in the survey.
Crude Oil Futures bounced up after falling to near technical support levels. There is light support around $90 from a technical point of view. WTI Crude Oil in New York is rebounding after approaching technical support at $88.35 a barrel on an Intraday Basis. That’s the 50% Fibonacci retracement of the rise to $99 on Sept. 14 from the 2012 low of $77.69 in June. Crude Oil also gained after settling below its lower Bollinger Band at $90.12 a barrel yesterday. The last time it closed below the band on Sept. 20 it increased 1.1% the next day. Buy orders tend to be clustered near chart-support levels. A weekly close with large volumes & sustained momentum below the psychological level of $90 could lead to further falls towards $79.75. If no further weakness is seen, then Crude Oil could consolidate around $90 level for a fresh bounce up towards its first resistance of $97.30 & then a stronger one at $100. Crude Oil will get highly bullish on a break above $100 for the longer term with immediate resistances seen then at $108.10 & then at $114.50. With so many simultaneous & large Monetary Easing programs announced by several important Central Banks, liquidity is abundant & will sooner than later trigger Inflation. Crude Oil Price rise is generally the biggest contributor towards global inflation rises. Technically, Brent is expected to trade between a low of $109 and a high of $111.50 a barrel in the next (Intraday) 24 hours. U.S. Crude Oil is relatively weaker because it slipped below its 100-day moving average of $90.27 in the previous session. TheU.S. contract may fall to Wednesday’s low of $89, with a possibility of slipping further to $88.50, with an upside capped at $91.50. Crude Oil may trade sideways, with Brent staying within a range of $108-113/bbl near-term.
Brent Crude Oil futures are seen holding steady above $110 on Thursday on renewed worries of supply disruptions from the Middle East. Support for Crude Oil Prices came on comments from Iran about neutralizing all efforts to sabotage its nuclear facilities. The geopolitical worries in the Middle East, while have been around for a long, long time, still continue to support prices. There is about a $20 premium on Brent prices because of the tensions in the Middle East over Iran’s disputed nuclear program. Without that, a fair value for the contract is around $80 – $90 a barrel, reported Reuters. Iran is under threat of military action from “uncivilized Zionists,” a clear reference to Israel, Iranian President Mahmoud Ahmadinejad said in a speech before the U.N. General Assembly. He also said that such threats from big powers are designed to force nations into submission.
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