Crude Oil after the IMF growth revision

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West Texas Intermediary crude oil futures prices are trading above $88.60/bbl in international market with gain of more than 0.25 percent. Oil prices have continued the positive rally driven by speculation of monetary easing and expectation continuous fall in crude oil stocks levels. Global market is eyeing on Fed’s testimony starting from today with an expectation of monetary easing in world’s largest oil consuming nation.

Likewise, slow down in China economy may go for step towards monetary easing .Thus, theses positive expectation are driving equity market higher in Asian region and oil prices have taken positive cues out of it on expectation of higher demand. As per US Energy department, crude oil stocks are likely to fall for the fourth week, which may support oil to gain some points. However, rise in petroleum stocks may limit the gains as refiners are raising their capacity. Another positive factor for oil prices today is, US have threatened to escalate the Iran Issue. The US will use all elements of American power to prevent Iran from obtaining nuclear weapons, as said by Hillary Clinton on yesterday. Thus, it may support oil to gain on threat of supply disruptions. Most importantly, reduction in economic growth outlook by IMF reported on yesterday which may have some pressure on oil prices. From economic data front, ZEW survey data are expected to show a negative picture for the European economy, which may add pressure on oil prices. However, US economic data releases are expected to paint a growth picture in the evening session which may support oil prices to trade on higher side.

The marquee event of the week will be Fed Chairman Ben Bernanke’s testimony before Congress. Traders are hoping to get some insight into what to expect from the Fed’s, although markets are not expecting any major revelation today, Bernanke has a way of catching markets off guard. On the off chance that he indicates additional QE, this might give a push to crude prices and commodity prices.

Currently, natural gas prices are trading below $2.800/mmbtu with loss of near 0.25 percent in Globex electronic platform. As per US weather channel, US temperature is expected to remain normal for 2-3 days, which may limit the demand from residential or industrial sector. Thus, gas prices may come under pressure. Power sector consumption have fallen by more than 1.5 percent in the last week, may limit the gain in gas prices.  As per National Hurricane centre, tropical storm Ellen has been strengthen with 70 knots in Eastern Pacific region, which may create supply concern to add positive direction in on gas prices. Civil war in Syria is likely to drive gas prices higher as supply disturbances are expected on the way. Likewise, positive US economic data may support gas prices to trade on higher side in the evening session.

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About: FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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