The FxEmpire Analyst team called it right. Several days ago, I wrote that Crude Oil looked to be heading below the $100 price level and yesterday crude traded as low as 99.20 before recovering to close at 99.96 this morning.
In the Asian session buyers took advantage of the low prices and bought up the commodity driving prices up to 100.42 while Brent Oil fell to trading below 107 on Tuesday. This morning Brent is also recovering, adding 46 cents to trade at 106.92. The overall situations in Libya, Iraq, Iran and Ukraine remains fairly constant although there seems to be no supply disruption.
Even as Libya begins to produce and ship more and more oil, the airport at Tripoli remains under siege. The war between Israel and Palestine is a new situation, adding more tensions to the global markets, but seems to have very little effect on the price of oil as the world drowns in pools of oil.
Stronger than expected data from China this morning has been the driver for oil traders as implied demand is helping push prices. China’s economic growth exceeded forecasts and crude stockpiles shrank in the U.S., signaling increased demand from the world’s two biggest oil consumers.
China’s economy grew by 7.5 per cent in the second quarter of 2014, marginally eclipsing the financial market’s expectation and showing signs that stabilization is under way. The second-quarter figure announced by the National Bureau of Statistics compared with growth of 7.4 per cent in the previous three months and exceeded the median forecast of 7.4 per cent in a survey of 17 economists by AFP. Economists believe the better than expected growth rate is the result of the government’s targeted spending measures put in place over the past six months.
Another report said China’s industrial production, which measures output at factories, workshops and mines, rose 9.2 per cent year-on-year in June. Retail sales, a key indicator of consumer spending, increased 12.4 per cent in the same month, while fixed asset investment, a measure of government spending on infrastructure, rose 17.3 per cent on-year in the first six months.
Weaker than expected economic data for the first half of the year prompted the International Energy Agency and other experts to trim their forecasts for short and medium term demand.
Yesterday, Fed Chair Janet Yellen’s remarks to Congress on the U.S. economy strengthened the value of the U.S. dollar, also helping to push oil lower. Because oil is priced in dollars, a stronger dollar makes oil look comparatively more expensive — and therefore less desirable — to holders of other currencies.
But analysts say the price of oil may not be able to fall much further, in part because increased supplies from Libya are far from assured. Investors will now await fresh information on U.S. stockpiles of crude and refined products, due Wednesday from the Energy Department. Figures for the week ending July 11 are expected to show a draw of 3 million barrels in crude oil stocks and a build of 1.2 million barrels in gasoline stocks, according to a survey of analysts by Platts