fbpx

Join our community of traders FOR FREE!

  • Learn
  • Improve yourself
  • Get Rewards
Learn More

WTI en route to biggest weekly drop since April

oilWTI marked strong daily gains during the first days of the week only to crumble on Thursday as Chinas manufacturing disappointed investors and Ben Bernanke announced Quantitative Easing might be tapered by the end of the year, if sustainable growth remains on track.

On the New York Mercantile Exchange, WTI crude for August delivery traded at $95.51 per barrel at 7:20 GMT, marking a 0.39% daily gain. Light, sweet crude rebounded after its biggest intra-day slump on Thursday since more than a month, but is still headed to a record week decline since April. WTI ranged today between days high and low at $95.74 and $94.71 per barrel respectively.

Meanwhile, Brent oil August futures also traded on the upside, gaining 0.53% on the day. The European benchmark stood at $102.69 at 7:20 GMT, new days high after it lost 3.48% on Thursday. Earlier Brent touched a daily low at $101.88 per barrel.

All commodities, led by precious metals, marked serious losses yesterday, pressured by the stronger dollar. The dollar index, which tracks the greenbacks performance against six major counterparts, ended 0.61% higher on Thursday after it hit a two-week high at 82.10 and extended further gains. So far, the dollar index marks a weekly gain of 1.43%. Strengthening of the greenback came after Ben Bernanke announced yesterday that the central bank won’t scale down its monetary easing program just yet, but that is highly possible to happen within the end of the year, provided the needed stable recovery signs. According to Bernanke, Fed’s moves are tied to what happens in the economy and the central bank has no fixed plan, sentiment points at reducing bond purchases. Bernanke said that if the economy continues to improve in line with Fed’s projections, it would be “appropriate to moderate the monthly pace of purchases later this year”, and end the program as the unemployment rate drops do 7%, which Fed expects to happen around mid-2014.

China slowdown

Meanwhile, another batch of disappointing China data was published, which caused further concern for global oil demand to arise. China’s preliminary reading of the HSBC Purchasing Managers’ Index showed the Asian country’s manufacturing shrank with a faster pace this month. The flash reading of 48.3, which, if confirmed, will be the lowest since September, mismatched the 49.1 forecast by a Bloomberg News survey and is worse than May’s final value of 49.2. China is the worlds second biggest oil consumer and accounts for 11% of global demand.

Ric Spooner, a chief market analyst at CMC Markets in Sydney said for Bloomberg: “There is caution creeping into the market. The China situation is obviously concerning the market.”

This comes after The World Bank reduced its forecast for the nation’s economic growth to 7.7%, down from 8.4%. Earlier, during the last week of May, the IMF cut its economy growth forecast for China to 7.75%, down from 8%. Record credit in the first four months of the year failed to spur growth and premier Li Keqiang said last night the financial system needs to do a better job of supporting the economy. The government is expected to boost credit support for strategic industries and those that are labor-intensive.

Syrian conflict

Meanwhile, oil prices keep drawing support from the civil war in Syria amid concern the conflict might spread to neighbor oil producing countries. A Reuters source at the last G8 meeting said that an international peace conference on Syria is unlikely to be held before August due to differences between Russia and the West.

Ric Spooner commented on the topic: “As far as the Fed is concerned, the direct impact to commodities is via the U.S. dollar. I suspect oil might not fall too far with the Middle East situation.”

John Kerry, U.S. Secretary of State, will meet tomorrow foreign ministers from ten other countries that are backing Syrian rebels in Doha, Qatar. Some of the countries, like France and Saudi Arabia, have stated the opposition is in need of heavier firepower, such as anti-tank and anti-aircraft weapons, whereas the U.S. position stands for supply of small arms only.

TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover Forex, Price Action and Social Trading.

Related News