Commodity Daily News

The Crude Oil Reverses Its Course

Yesterday some optimism prevailed in the market as investors became more secure that government's steps will succeed in easing the global credit crisis. As a result the Crude Oil rose more than $2 a barrel for the first time in five days. The rise in Crude apparently came because the stock market began to recover from the large drop it saw in earlier trading. The Dow Jones Industrial Average rose 430 points from the intraday low on speculation that the Federal Reserve will cut interest rates to stabilize credit markets. Another cause for the oil rebound is the Organization of the Petroleum Exporting Countries (OPEC) announcement that it will take appropriate measures to stabilize international markets. OPEC, is the supplier of about 40% of the world's oil and may announce output cuts at its December meeting if the demand for crude continues to slow down. A crisis that began with the overheated U.S. property market is still rocking confidence worldwide. The financial crisis reduces oil demand in the United States and other industrialized countries. Crude Oil demand in China, which is one of the biggest oil consuming countries, will be the key. The market is watching for signs that the crisis is hitting consumption there as well.
Unfortunately the downward decline that we witness in most markets, is not likely to end anytime soon, even if credit markets will reverse themselves. Nevertheless, latest news coming from Mexico that the state-owned oil company Pemex is evacuating four offshore oil platforms due to tropical storm Marco could become supportive for Crude prices.