Crude Oil Tumbles On Fed Statements

Jun 21 • Market Commentaries • 2847 Views • Comments Off on Crude Oil Tumbles On Fed Statements

Disappointment with the Fed decision yesterday weights heavily on Crude Oil. Crude has dropped to 80.39 and looks to break under the 80 price level. Not only did the Fed only do the bear minimum yesterday, by extending Operation Twist, they revised growth forecasts for the US, which has a negative effect on energy. Lower growth, lower consumption, lower demand, lower prices.

Crude oil futures prices have taken negative cues from rising stock piles data reported by US Energy department, along with down gradation of US growth forecast. During early Asian session, oil futures prices are seen trading down by more than 1percent below $81/bbl in the electronic platform. As per US Energy department, crude oil stocks climbed above 2.8 million barrels in the last week, reaching a high of last 22 years. Weekly demand has been declined by 4.2 percent, whereas supply and imports has been increased making stock piles so high. So, we may expect higher stock piles along lower demand may continue to weigh on oil prices. Fed officials have cut the estimate for economic growth and labor sector growth forecast in 2012 to between 1.9 percent and 2.4 percent, and unemployment to remain in between 8 to 8.2 which is higher than last estimates. However, it has extended monetary stimulus known as Operation Twist by selling short term debt worth $267 billion and buying the same amount of long term debt.  So, down gradation of growth forecast may continue to pressurize oil price on concern of lower demand from worlds’ largest oil consuming nation. Other than this, manufacturing activities of major nations like China, US, and other Euro-zone, which may keep oil prices under pressure.


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Market will be eyeing on US weekly jobless claims data which are likely to increase. Most importantly, Spanish bond auction is due for today, which may create some volatility in the market during European session. Overall, we may expect oil prices to reaming under pressure throughout the day today.

Currently, gas futures prices are trading above $2.517/mmbtu with gain of near 0.40 percent in electronic trading. Today we may expect gas prices to continue the positive trend supported by its intrinsic fundamentals.  As per National Hurricane centre, tropical storm Chris has been strengthen with 50 knots in north Atlantic region, which may create supply concern to add positive direction in on gas prices.  As per US Energy department, natural gas storage is expected to increase by 64 BCF in the last week. Consumption of power sector has also increased by 6 percent, which may support gas prices to remain on higher side. As per US weather forecast, temperature is expected to remain high in eastern region, which may create demand for gas consumption.

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