Crude Oil Declines For Second Day, Will It Continue This Correctional?

Crude oil extended yesterday’s losses after it reached as high as $98.27 on hopes of more easing for the world’s largest economy along with contracting U.S. supplies that signaled hopes for demand recovery. However, continuing fears over Europe’s outlook pushed the commodity downwards correcting some of its weekly gains.

Crude oil opened today’s session at $95.93 and reached a high of $96.12 and a low of $95.39, where it is currently trading around $95.55 a barrel.

Oil reached high levels on hopes for more easing from the Fed which pressured negatively the U.S. dollar, but doubts surfaced again over this action as St. Louis Federal Reserve President stated that the economic outlook had brightened since the August 1 meeting, where the meeting minutes triggered hopes of monetary easing on Wednesday.

These comments and other official comments downplayed a strong action by the Federal bank giving the dollar strong upside momentum after three consecutive days of losses, and that pressured on crude oil.

On the other hand, uncertainty in Europe is rising amid investors’ anxiety over Greece’s fiscal position and whether it will be able to meet its fiscal requirements. Greek PM Antonios Samaras is due to meet with the German Chancellor and the French President in order to discuss this issue today and tomorrow.

The German Chancellor said after she met with the French President that “It’s important to me that we all stand by our obligations and wait for the troika report and see what the result is, where the report is due next month on Greece’s progress in meeting its bailout terms.”

Also, fears are intensifying over Spain’s outlook and whether the country will call for a full bailout to meet its financial obligations, after reports said that the country is negotiating with the ECB for more aid —beyond its banking support program — but an ECB spokesperson denied all these reports.

All in all, all these factors were behind this downside correctional wave along with profit taking operations after the commodity reached very high levels, but where crude is going to and whether this downside correctional wave will proceed or it will stop soon, this depends on the coming factors in the coming days.