As trading volumes are thinner than usual ahead of the Christmas holiday while the market participants lack confidence as hopes for a budget deal in the U.S. dimmed, crude oil inches down towards the $88.50 level.
Crude fell for the second day on Monday as the inability of the United States to resolve its budget crisis before the year-end became very possible. This would allow the $600 billion of automatic tax hikes and spending cuts to take effect in January.
U.S. lawmakers failing to avert the “Fiscal Cliff” could push the world’s largest oil consumer into recession, darkening the outlook for demand on oil. These uncertainties combined with the rising oil supplies continue to put more downside pressures on prices.
Adding to the downside pressures on crude are the investors who are worries about exposure to risk, especially as trading volumes are thinner than usual ahead of the holidays which makes movements more aggressive, so many are closing their positions.
Crude oil is trading as of this writing around the $88.53 from the opening at $88.77 and with the highest at $88.79 and the lowest at $88.43. Brent is trading at $108.80 a barrel after falling 0.16%.
Natural gas is trading around $3.419 per 1,000 cubic feet after falling 0.93%; heating oil is trading around 3.024 after rising 0.06%; gasoline is trading around $2.732 a barrel after falling 0.07%.
Meanwhile, the tensions in the Middle East that may threaten supplies from the region and comments from Saudi Arabia’s Oil Minister Ali al-Naimi, prevented oil prices from falling further. Naimi said that demand for crude matches supply and the global market is stable.
Iran’s oil-ministry website reported yesterday that the Organization of the Petroleum Exporting Countries estimates that prices will stabilize above $100 a barrel in 2013 and that it will hold an emergency meeting if prices fall below that level.