During the early Asian session, crude oil futures prices are trading above $90.45/bbl with a gain of more than 40 cents on the Globex electronic platform. This may be a slight pull back on expectation of China will accelerate efforts to spur growth after the manufacturing index fell below 49 in May. On the other hand, most of the Asian equities are trading down on concern from slowdown in manufacturing activities in China.
In addition to this, the seventeen block Euro currency is also under pressure after no solid outcome came from the EU summit yesterday. The European Union summit ended with a warning to Greece that it will have to stick to its bailout terms if it wants to stay in the euro zone, but failed to resolve Franco-German differences over the issue of euro bonds.
So, the concern from Greece is likely to continue to apply pressure to the financial markets, and, consequently, on Oil prices. During the Asian session prices are likely to trade under pressure. However, most of the economic releases from Germany, the Euro-zone’s largest economy are expected to be positive which may push oil prices to gains during the European session. In the US session, weekly jobless claims are likely to increase, whereas durable goods orders may rise.
In the near-term oil prices will take cues from developments on the Iran front, Greece’s status in the Euro Zone and economic growth forecasts. With all these factors pointing towards a negative scenario, the short-term trend is expected to be bearish.
According to the US Energy Department (EIA) report last night US crude oil inventories increased less than expected by 0.9 million barrels to 382.5 million barrels for the week ending on 18th May, 2012. Crude oil inventories output is at the highest level in nearly 22 years.
Oil prices may get a mixed impact from the economic releases. Most importantly, the markets will be eyeing the resumed talks on the Iran nuclear program for the second day today in Baghdad. Any news coming from this meeting may well impact the price direction.
Currently, gas futures prices are trading below $2.727/mmbtu with a loss of more than 0.30 percent on the Globex electronic platform. According to the National Hurricane Centre, tropical storm Bud is building in intensity which may cause supply disruptions in the Gulf areas. The US weather channel forecasts remain warmer weather than normal temperature for most major US cities which may lower consumption on a/c units. According to the US energy department, storage level injection is likely to increase by 78 BCF, which is lower than last year’s injection at this time.