Commodity Daily News

Price of Crude Oil will be Heavily Influenced by U.S. Bailout Package

Crude Oil continues its decline; the contract price settled down at $106.89 a barrel last Friday. Even though there has been some bullish momentum in the market for the past few months, prices are still down 28% from record highs above $147 a barrel reached in July. The main reason for that spike was the economic crisis world-wide and high fuel costs which hurt demand in the United States and other developed economies. The price of Oil is down now primarily because of the USD. The dollar rose against the major currencies on Monday. Hopes that the bailout bill will soon be passed and revive the U.S. financial system has spurred a rally in the U.S. currency.

Moreover, the latest news that Iran, the world's fourth-largest exporter of Oil, has avoided new sanctions in a United Nations vote over the weekend also put some downward pressure on prices of Light Sweet Crude. However, the traders remain cautious about the U.S. government's bailout package. There is some fear that this risky package could generate a decrease in the demand for Oil. The market is paying close attention to the U.S. lawmakers' upcoming vote later today, which will establish future U.S. government policy regarding monetary and fiscal policy. A possibility still remains that the $700 billion government bailout package won't pass in Congress. In that case, a looming economic slowdown in the U.S. won't be prevented and would cut demand in the world's biggest energy-consuming nation, which will lead to further deterioration in the price of Crude Oil.