Crude Oil Declines on Growth and Supply Forecasts

By FX Empire Analyst - Barry Norman
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Wednesday morning finds crude oil futures prices falling below $91.50/bbl with loss of more than 0.30 percent in International market. Concern of rising inventory level and economic uncertainty are together weighing on oil prices. The American Petroleum Institute reports that crude oil stocks have been increased by more than 462K barrels in the last week with lower pace of drawdown in petroleum stocks. Rising US domestic production is likely to show more stock piling in DOE inventory report releasing tonight. Lower pace of rise in demand in comparison to higher production may continue to weigh on oil prices. The National Hurricane Center says, there is no sign of major tropical cyclone formation in US Gulf region.

Oil prices fell yesterday in choppy, light trading, pressured by the outlook for weak economic growth and petroleum demand, even as the risk of potential crude supply disruptions limited losses. Global economic growth has slowed this year, curbing fuel demand growth in Asia, Europe and the United States. Investors remain wary, however, of unplanned supply disruptions, especially in the Middle East, that could force prices higher.

The dispute between the West and Iran over Tehran's nuclear program continues to simmer after last week's posturing speeches by heads of state at the United Nations General Assembly.

Ahead of the inventory data today, U.S. crude stocks had been forecast to have risen 1.5 million barrels last week, a Reuter’s poll of analysts showed. Gasoline stockpiles were expected to be down 600,000 barrels and distillate stockpiles were seen lower by 400,000 barrels.

The Asian Development Bank has been cut the growth outlook of Asia and China. Speculation of easing by China is creating a small rally in Asian equity market after the Non Manufacturing PMI numbers fell in the last month. The trend for the day is also likely to be bearish driven by Spain bailout concern and US monthly jobs data tomorrow. During the US session, we may see volatility in the market as presidential election campaigning is due to heat up today. Any statement related to energy sector may create fluctuation in the trend.

Natural gas prices are holding $3.50, down by more than 0.60% in Globex electronic platform. Today, we may expect gas prices to continue its upside trend driven by speculation of demand for space heating purpose as weather is likely to remain cool in most of the Eastern region in US. The US Energy department projects that natural gas stocks are likely to increase by 74 BCF in the last week, lower than prior week. Thus, slower pace of stock injection may support gas to trade on higher side.

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