Author: napara111

It was rather an eventful week despite the absence of major central bank meeting. Germany’s Chancellor Angela Merkel started her 3-day trip in China, meeting leaders of the world’s second largest economy for discussions on resolution of the Eurozone sovereign debt crisis, Iranian and Syrian issues, and rare earth restriction. Chinese Premier Wen Jiabao stressed that solving the European debt crisis is ‘urgent’ and China is ‘considering more participation’ in the European Financial Stability Facility (EFSF) and the European Stabilization Mechanism (ESM).

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Weekly Fundamentals – Germany Calls China for Investing in Eurozone, Influencing Iran

According to the DOE/EIA weekly report, total crude oil and petroleum products stocks rose +8.41 mmb to 1055.83 mmb in the week ended January 27. Crude stockpile increased +4.18 mmb to 338.94 mmb as stocks gained in 4 out of 5 PADDs. Cushing stock added +1.48 mmb to 30.12 mmb. Utilization rate slipped -0.4% to 81.8%.

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Oil Inventory Soared for a Second Consecutive Week

The US Dollar Index closed off the Friday’s trading session back under the 79 level as Wednesday’s announcement that the US Fed is considering more QE and further delays in interest rate rises saw the US dollar drop over one percent against other major currencies.

Latest Dollar Index Rate

The ICE US Dollar Index, which tracks the US dollar against six major world currencies was trading at 78.935 at close on Friday.

The euro rose 0.6 percent against the US dollar to push back over $1.31, its highest level in nearly five weeks.

US Fed Policy

The US dollar weakened after the US Federal Reserve extended its pledge on maintaining interest rates at ultra low levels until at least late 2014, much later than traders had expected.

Prices of gold and US government debt rallied on the Fed’s statement on rates and on comments by Ben Bernanke, who left the door open to further monetary stimulus if the US economy deteriorates this year.

Meanwhile, oil prices remained firm as continued tensions over Iran kept the price of US WTI oil futures close to $100 a barrel. US Light oil futures for March delivery dipped $0.14 or 0.1 percent to settle at $99.56 a barrel on the NYMEX on Friday.

A weaker US dollar tends to add weight to higher oil prices as crude becomes cheaper to buy for investors using other currencies. Gold prices and other commodities also gain from a weaker greenback.

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US Dollar Index slips below 79, adding fuel to higher crude oil prices

EU foreign ministers this morning have confirmed the ban on all Iran oil imports to Europe, with the sanctions involving an immediate ban on all new oil contracts with Iran, while existing contracts will be honoured until 1st July.

Under the new deal, EU governments are expected to have to stop signing new contracts with Iran the moment the ban comes into place, which could be as soon as this week. Extra restrictive measures on Iran’s central bank are also expected to be agreed by EU ministers, although no further details have been given.

EU foreign policy chief Catherine Ashton earlier said the sanctions were a way of persuading Iran to take part in talks.

“The pressure of sanctions is designed to try and make sure that Iran takes seriously our request to come to the table and meet,” she said as she arrived at the meeting in Brussels.

She said world powers had yet to receive a reply to an offer made to Iran in October to hold new talks.

Iran’s Nuclear Programme

“I am confident that the EU will give a resolute answer today to Iran’s refusal to fulfill its international obligations on the nuclear programme,” German Foreign Minister Guido Westerwelle said ahead of the official adoption by the foreign ministers.

Foreign Secretary William Hague urged Iran to “come to its senses” and resume negotiations on its nuclear programme after Britain, America and France sent six warships through the highly sensitive waters of the Strait of Hormuz.

He said the EU oil embargo was part of “peaceful and legitimate” measures and not designed to trigger conflict.

Any bid by Iran to block the Strait of Hormuz at the entrance to the Gulf, through which 20 percent of the world’s oil exports pass would be “illegal” and “unsuccessful”, Mr Hague warned, adding that an oil embargo was designed to persuade the Iranian government to launch meaningful talks with the international community on its nuclear intentions.

The ongoing effort to take Iran’s 2.6 million barrels of oil per day off international markets has kept global oil prices high whilst pushing down Iran’s rial exchange rate on world currency markets.

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Ban on Iran oil imports to Europe is confirmed by EU foreign ministers

Oil prices had a volatile day on Wednesday, initially climbing higher but gains were than erased amid a report that the Keystone XL pipeline proposal was rejected by the government. The IEA’s latest forecasts indicated a fall in oil demand in 2012. The front-month contract for WTI crude oil ended the day at 100.59, down -0.12%, while the equivalent Brent crude contract plunged -0.78% to settle at 110.66. On the macro front, the World Bank lower its global growth forecast to +2.5% for 2012, down from +3.6% projected 6 months ago.

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Oil Drops as Keystone Pipleline Project Rejected