Crude Oil and the current EU Crisis

Jun 5 • Market Commentaries • 1067 Views • Comments Off on Crude Oil and the current EU Crisis

During this morning’s session crude oil futures prices are trading above $84.73/bbl in electronic trading. Most of the Asian equities are up near 1 percent on speculation of positive expectation from ease of debt crisis in Euro-zone.

Most importantly, market will be eyeing on G-7 meet, where sign of heightened global alarm about strains in the 17-nation European currency area. Euro is up by 0.20 percent above 1.2525 levels, which is also supporting oil price trend. From economic front, most PMI numbers from German and euro-zone are expected to turn negative, which may pressurize oil prices during European session.

G7 and the EU are going to discuss a scheme promoted by German Chancellor Merkel which will result in a region-wide deposit guarantee scheme that can help leaders better manage the debt crisis in the region. Merkel is pressing for more ambitious measures, including a central authority to manage Euro-area finances, and major new powers for the European Commission, European Parliament and European Court of Justice. However, the outcome may remain fragile as mounting debt and Spanish banking recapitalization may continue to haunt investor sentiments and may weaken during the session due to uncertainty prevailing over the peripheral nations. From the economic data front, the German services PMI and Factory orders along with Eurozone may remain weak due to deteriorating economic activity and may further weaken commodities.

Chinese private services PMI increased more than expectations supporting gains.


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ISM Nonmanufacturing composite from US is expected to fall, which may further pressurize oil prices. On the other side, as per US Energy department, crude oil stock is expected to decline for the first time in last 11 weeks of time. However, petroleum stocks are likely to increase, as refiners have increased their capacity utilization to meet the summer demand.

A drop in crude oil stocks may support oil to take some positive cues. Overall, we may expect oil prices to trade in a positive trend, whereas little pressure can be seen during second half of the day.

Currently, gas futures prices are trading below $2.448/mmbtu with gain of more than 0.60 percent in Globex electronic platform. Currently, the storage level is at 2815BCF, positioned storage volumes 732 Bcf above year ago levels. In the coming week, also the injection level is likely to increase on the back of rising supply and lower demand, which may weigh on gas prices. On the other side, as per National Hurricane Centre, weather condition is expected to remain hot, which may pull demand from residential sector.

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