Commodity Daily News

Crude Falls below $90 as Credit Crisis Spreads Out

While the United States has managed to buy some breathing room in this credit crisis with a series of takeovers and bailouts, Europe is now fighting in order to contain its financial fallout. Oil prices are falling for a fourth consecutive day as traders feared efforts to contain the spreading credit crisis would fail to stave off a deeper decline in Oil demand. The price of Crude Oil has fallen almost $3.50, to $90.12 a barrel in today's early trading session.

It was a relatively quiet weekend in the U.S. financial sector after Friday's passage of the $700 billion bailout bill. In Europe, however, officials scrambled to save three banks, underscoring the creeping effect of the credit crisis. With the widening signs of slowing global economic growth, which reduces demand for Crude, it's highly likely that the market is going to slow even more over the next few months. There are risks that the prices could move down to as low as $60 a barrel.

Following the approval of the bailout bill the dollar rose to a 13-month high against a basket of currencies. The higher dollar, also weighing on Oil, reflects expectations that the slowdown is spreading to the Euro-Zone. However, concern remains that the U.S. bailout may add stress to the rest of the U.S. economy, and the country may fall further into a recession. This will eventually cool demand for Crude Oil even more. As Oil prices decline, the Organization of Petroleum Exporting Countries (OPEC) may be prompted to cut output in order to provide support to the price of Crude Oil. The uncertainties in the market are extremely high and traders should remain cautious.