News EIA Report
Previous 4.3 million barrels
Forecast -1.0 million barrels
Analysis
OPEC like once before caused crude prices to start rising as a result of them wanting to cut supply in the markets as they believed it is excessive at a time where there is crippled demand from major economies as they are in a slowdown. By cutting supply the would help prices from falling to low, yet this caused investors to believe that this was going to negatively affect supplies in the market if they cut production too much.
Another support to the rise we saw yesterday was an oil sector still shutdown in the Gulf of Mexico in respect to Hurricane Ike that once threatened supplies. Also in news was the EIA lowering its world oil projections for demand in 2009 against this year, yet this slightly affected prices as OPEC was still the major issue. The contract gained $2.25 closing at $90.06 while recording a high of $93.02 per barrel and a low of $87.87 per barrel.
Today prices are plunging once again like before as the economical factors of the global slowdown is causing demand for crude to fall. The tightening credit conditions in the market is spreading further to many economies as it holds them down from reviving as they all come close to falling into recession which is another reason demand would be lowered. Also as the U.S. is known to be the world's biggest crude consumer, the focus remains on the performance of this certain nation for hints of upcoming demand is going to be. Still the markets are trading below the psychological barrier of $100 as today it opened at $89.56 while recording a high of $90.04 per barrel and a low of $88.37 per barrel.
The EIA is scheduled to come out today with expectations showing that the U.S. oil stockpiles will decrease by 1 million barrels. As for distillates which include heating oil and diesel fuel are projected to incline by 1 million barrels while gasoline inventories according to predictions will rise 2 million barrels.
The volatility in the market is proving that investors are confused and do not what to pay attention, whether it’s the global slowdown or OPEC cutting supplies. In my opinion I believe that even if prices do incline it is going to be temporarily and will eventually fall in the medium and long terms even if OPEC cut their production since the global slowdown is far from ending anytime soon.