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Crude Oil Weakens As Traders Worry About Tax Changes in the US

By:
Barry Norman
Updated: Aug 21, 2015, 01:00 UTC

Crude oil prices were up as bargain prices during the week attracted investors but the upside was limited as uncertainty over the fiscal cliff still

Crude Oil Weakens As Traders Worry About Tax Changes in the US
Crude Oil Weakens As Traders Worry About Tax Changes in the US
Crude Oil Weakens As Traders Worry About Tax Changes in the US

Crude oil prices were up as bargain prices during the week attracted investors but the upside was limited as uncertainty over the fiscal cliff still continues. Fiscal cliff negotiations continue to drag on after Speaker of the House of Representatives John Boehner was unable to muster enough votes within his own party over an alternative plan of spending cuts and tax hikes known as “Plan B.” At a press conference Friday morning, Boehner reiterated the need for political leaders to come together. Congressional leaders leave Friday for the Christmas holiday, but they can come back Dec. 27 and continue to discuss alternatives.

The Obama administration may reach out to congressional leaders after the failed vote, Republican members “will probably have to take some time to reconsider their priorities and strategy. Bottom line, it seems unlikely that any legislation to address the main fiscal cliff policies will be passed before the end of the year. We expect negotiations to continue into the New Year. It may take the imminent threat of a breach of the debt limit in February, or March at the latest, to force an agreement. The direct effects of higher taxes and spending cuts, which take effect in January, will probably not be felt immediately. But the longer those policies are in effect, the greater the impact on the economy,” they said.

Crude oil continues to tumble in early trading in the Asian session now priced at 88.55 down by 11 cents and remaining weak. Traders can expect crude oil prices are down as demand looks weak and lower volumes due to Christmas can also put pressure on prices. As the US dollar continues to climb as traders move to safety as risk aversion becomes the market mode.

Western sanctions on Iran’s shipping and energy sectors caused serious problems for its oil industry earlier this year but Iran has mostly overcome those challenges, Oil Minister Rostam Qasemi was quoted as saying on Sunday. Iraq is on a push to sell its swelling crude output and sit at oil’s top table with Saudi Arabia, sweetening terms for contract buyers next year, its customers say.

Money managers, including hedge funds and commodity trading advisers, cut their net long position in natural gas futures, options and swaps in the week ended Dec. 18, data from the U.S. Commodity Futures Trading Commission showed on Friday ahead of the holiday and the year end, as tax changes worry traders in the US.

There are a few U.S. economic reports on tap for next week, with housing data and manufacturing data, the Chicago Purchasing Managers Index.  Nomura analysts said considering the bickering over the fiscal cliff and no resolution, Thursday’s consumer confidence data will likely be the most important economic report.

U.S. natural gas futures were down on Friday pressured by profit taking but the downside was limited by colder extended weather forecasts that should boost demand for heating. Expect Natural Gas prices to go up as a colder weather outlook can boost the heating demand and support the prices. However lower volumes due to Christmas holidays can cap the upside as gas futures on the New York Mercantile Exchange ended down 1.1 cents at $3.451 after trading between $3.425 and $3.508. Natural gas continues to weaken this morning trading at 3.462 down by 0.021.

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