Crude oil remains high at 105.53 easing by 17 cents this morning. Crude continues to remain well over priced as political tensions in Egypt continue to stress markets. Global fundamentals do not support a rise in prices, in fact just the opposite the price of crude should be falling as production increases around the globe with US production hitting record levels. Growth around the globe continues to ease. The US is now aiming at a GDP for 2013 at just 2% while Chinese GDP continues to fall, after being downgraded recently from 8% to 7.6% then to 7.5% and now could come in as low as 6.5%. Demand for crude oil continues to tumble.
Yesterday crude oil for the August settlement at the NYMEX closed on the lower side of the intra-day trading range, with most of the loss occurring late in the North American session due to the mixed inventory report from the American Petroleum Institute. NYMEX oil closed at $106 per barrel, down nearly 0.3%. Brent for September managed a moderate upside closing, higher by 0.1% to 108.10 per barrel.
According to the overall trend in crude prices, traders have been witnessing sustained climb in prices backed by higher demand from the US due the summer driving season and to issues pertaining to political unrest in Egypt. Higher demand in the US has also led to a significant drawdown in crude stockpiles, especially in the two continuous weeks ending 5th July, 2013. US government data showed the total oil stockpiles slipped around 20 million barrels, its steepest two-week drop in inventories in 30 years.
Egypt’s new government appointed a cabinet of secular-leaning ministers on Tuesday, over the objection of the ousted president’s supporters, adding to the once-powerful Islamists’ political isolation amid a rash of deadly street violence. According to the Wall Street Journal absence of Islamists in the cabinet, coupled with the Brotherhood’s continuing anger over Mr. Morsi’s ouster and the arrest of several high-level Brotherhood officials, all serve to deepen the group’s isolation and threaten to exacerbate the new government’s shaky footing. The latest street violence began Monday night when hundreds of Mr. Morsi’s mostly Islamist supporters burned tires to block traffic on the 6th of October bridge, a major artery that connects downtown Cairo with the suburb of Giza.
While traders focus remains on Mr. Bernanke and his testimony before congress over the next two days and the possibility of tapering of monetary stimulus leaves the dollar weakened but moving up to 82.76 after tumbling earlier in the week, after trading as high as 84.8 last week.
The API said yesterday that the total stockpiles fell 2.6 million barrels though gasoline and distillate inventories advanced, negating the overall increase in cumulative stockpiles. In other major developments, the Department of Energy is expected to show the total crude inventories fall of around 1.5 million barrels for the week ended July 12.