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Crude Oil Price Slides Further. Temporary Support At 60?

Mon, Jul 6 2009, 04:40 GMT
by Oil N' Gold Team

Oil N' Gold

Extending last week's -5% decline, WTI crude oil price breaks below 65 in Asian session Monday as driven by strength in the dollar and weakness in stock markets. The larger-than-expected reduction in non-farm payrolls continued to affect investors' confidence in economic outlook. Others in the energy complex also drop with gasoline, heating oil and natural gas losing grounds to 1.751, 1.662 and 3.52, respectively.

Except for Japanese, USD rises against major currencies as reduced risk appetite drove investors to safe assets. Treasury also rises with the 10-year yields dropping to 3.48%, the lowest level since late May. Apart from safe- haven investments, the Fed's purchase of notes due from December 2013-April 2016 today is another driving force.

Stock market tumbles in Asia today with the MSCI Asia Pacific Index slipping -0.6%. In Japan, Nikkei 225 Stock Average loses -1.6% to 9661, Rally in Japanese yen is expected to have negatively affected exports and hence the nation's economy.

Attacks from the MEND continue in the Niger River Delta. Over the weekend, the main militant groups claimed that they destroyed an oil facility operated by Royal Dutch Shell in the southern part of the country. The news had failed to support oil price this time as the market is more worried about macro economic outlook.

Analysts from JP Morgan last week forecast that oil price will have a correction down to 60 and possibly lower as they believes recent surge in oil price should dampen oil demand. 'It is always difficult to meld short term price shifts with seasonality and predict a precise outcome for oil demand, but with gasoline there is a very clear price response ... we should not be surprised that the rise in retail gasoline prices above $2.64/gallon is being reflected in a trimming of US gasoline demand - down to 9.053M bpd in the latest two weeks. High unemployment and the recessionary mentality make the consumer more sensitive than under a healthy economic growth scenario'.

The analysts also stated that while it may be too early to say high oil price has 'ration away' the supply tightness, it only takes a small change in the demand/supply balance to delay the tightness the market has long-awaited to the second half of 2010.

Oil minister in Kuwait, the 6th largest oil producer in OPEC, said that he would like to see oil price to stay above 60 so as to meet the nation’s budgetary target.

Currently trading around 930, gold price for August delivery continues to gyrate within the range of 913.2-949. As the yellow metal's inverse relation

Published on  Mon, Jul 6 2009, 04:42 GMT