Increasing crude oil inventories cased the fall?
On Monday Brent was down under $58, the Crude dropped more than 3% while WTI fell below $48 per barrel.
On Tuesday the oil fell to a new 12-month low. A reason for this is the developing concerns of an oil oversupply in the market. Another reason for the drawdown are the growing concerns about a possible global economic retraction.
There are also other reasons for the sudden fall, for example, increasing crude oil inventories and anticipated developments in shale production gave a bearish momentum to oil as well. But the main factor for the drop was strengthened by the general selloff in the markets.
Genscape said that inventories are increasing and that alone has increased concerns of moderate demand due to rising supply extension. Phil Flynn, an analyst at Price Futures Group in Chicago, according to Reuters said “The Cushing number came in higher than anticipated … it’s definitely pointing to the concern that there is more supply and demand is weakening,” “The market is still very nervous about that.”
Dollar remains weak
Due to the anticipation of a dovish hike from the Fed today, we noted that the popular USD remains weak. Trading areas are yet moderately tight for the time being with EUR/USD in the 30 pips range.
Nevertheless, the major pairs are currently expanding near the tops versus the greenback. In the meantime, stock market feeling is somewhat mixed with the Shanghai Composite trading at the low, down by 1.1 %. The Nikkei is ending the trading day with more than a 0.5% drop.
Gold prices went higher
U.S. gold futures went up 0.1% to $1,254.58 per ounce while Spot gold gained about 0.1% at $1,250.20 per ounce. On Wednesday Gold went higher to a more than 150-day high while a softer greenback strengthened the bullion. All this while traders anticipate signs from the expected rate hikes of the U.S. central bank. A commodities analyst in Singapore said, “The market is largely in a holding pattern as everyone is focusing on the FOMC (Federal Open Market Committee) meeting … We see prices largely range-bound.”
S&P 500 is weakening
The general market index closed the day just before the flat line at about 2,546.10 after cutting a positive momentum of more than 0.8% and dropping into a negative area later in the afternoon. The S&P 500 scored a fresh day low for 2018 falling to 2,528.70. Another driver was the fall in oil prices and concerns that the FED’s rate hikes program are too much for the economy. On Tuesday the S&P 500 finished just above its year low while equities fought to hold an active retracement during the trading session.