Author: SondraHunter

The ICE US Dollar Index has been sliding since the 13 January 2012 where it registered a high of 82.040, however the dollar was stronger today, registering 78.595 as the index claws it’s way back to the 79 / 80 level which will help cap oil prices.

Latest Dollar Index Rate

The ICE US Dollar Index, which tracks the US dollar against six major world currencies was trading at 78.595 15.21 GMT today, from the session open of 78.578.

The index continues to trade within the confines of a descending channel formation and rose as some of the investment money in oil and commodities flowed into currencies. The US dollar rebounded from a near three month low against the euro and retreated from a nine month peak versus the Japanese yen.

Dollar v Euro

Currency investors sidestepped news that Standard & Poor’s cut its ratings on Greece to “selective default” as Athens’ efforts to lighten its debt burden was largely expected to trigger the downgrade.

They also took in their stride the ECB’s temporary suspension of Greek bonds as collateral for its funding operations as well as a solid Italian debt auction.

Still, many were cautious about pushing the euro too much higher ahead of an ISDA ruling on Wednesday. The derivatives body will rule whether a Greek credit event has taken place after the country began a bond swap process.

The euro stood at $1.3444, up 0.3 percent on the day, trading not far from a near three-month peak of $1.3487 set on Friday. Traders cited decent offers at $1.3480 and a reported option barrier at $1.3500 which would check gains.

Immediate support for the common currency is seen in the $1.3357-66 area around recent lows, with $1.3291 marking the 38.2 percent retracement of the Feb. 16-24 rise.

“The euro has priced in a cash injection of 500 billion euros and anything above 600 billion will be risk positive and push the euro higher,” said Ankita Dudani, G-10 currency strategist at RBS Global Banking.

“The markets have treated the Greek headlines as old news and are focusing on the positives of the ECB liquidity injection tomorrow.” said Vassili Serebriakov, a currency strategist at Wells Fargo & Co. in New York.

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US Dollar Index claws way back to 79, will help cap higher oil prices

Financial markets waxed and waned yesterday with market sentiment dampened by the non-eventful G-20 meeting. Moreover, although Germany’s lower house approved the second Greek bailout package, S&P’s cut the credit rating of the debt –ridden country to ‘selective default. Amid concerns over the pace of economic recovery, crude oil prices declined after soaring to multi-month highs last week. The front-month contract for WTI crude oil fell to 107.27 before settling at 108.56, down -1.10% while the equivalent Brent crude contract plunged to 123 before ending the day at 124.17, down -1.04%

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Sentiment Damped as Greece Downgraded to Selective Default

Rocketing oil prices could reach record levels any time soon and put the world into a global recession as concerns in the Middle East over oil supply have driven Brent crude oil futures, in euro terms to an all-time high of 93.60 euros a barrel this week, topping its 2008 record.

“The West’s determination to prevent Iran acquiring nuclear weapons is coming at a price, a price that might include a second global recession triggered by an oil shock.” said David Hufton from the oil brokerage PVM.

In US dollar terms, US Light crude oil prices are still some $20 a barrel short of their 2008 record of $147, but a recent monthly survey showed oil analysts revising up their predictions for crude oil futures as prices rocket ever higher.

Oil Prices – $150 a Barrel

Ian Taylor, head of the world’s biggest oil trading house Vitol, commented this week that crude oil prices could spike as high as $150 a barrel if Iran’s arch enemy Israel launched a strike at its nuclear facilities, an option Israel has declined to rule out.

“I used to think this would never happen, but everyone you speak to says the Israelis will have a go at striking at Iranian nuclear sites.” Taylor said.

“The day that happens, you have to believe the Iranians throw a few mines in the Strait of Hormuz and, for a few hours at least or maybe more, I cannot see a scenario where prices would not be at that sort of level.”

Middle East Oil Supply Concerns

So far this year, the price of European Brent crude oil has gained more than 15 percent, pushed up mainly by fears surrounding Iran. The loss of oil supply from three small and mid sized producers suffering internal turmoil, being Syria, Yemen and South Sudan has added to supply worries.

US WTI Oil Price

US WTI Light oil prices for April delivery rose for the seventh straight session, to as high as $109.95 a barrel, before pulling back slightly to settle up $109.77 a barrel on the NYMEX at Friday’s close.

The US Light oil futures contract gained a massive 6.3 percent this week, lifted largely by worries about Iran.

“People are afraid to go home short this weekend. Nobody knows what’s going on with Iran.” said Carl Larry, president of the trading advisory firm Oil Outlooks and Opinions. A short position is a bet that oil prices will fall.

Oil Supply Shock in Europe

The steady rise in crude oil prices recently has left analysts and oil traders concerned about its potential impact on global economic growth, especially given recent encouraging signs of economic recovery in many developed countries.

However, Europe may have more to fear as its fragile economic growth reverses path back into the negative whilst Greece, Italy and Spain look for alternative sources to the crude oil they currently import from Iran, where an EU oil embargo, intended to make Iran abandon what the West fears are efforts to develop nuclear weapons, comes into force in June.

But there are other factors at work on the oil prices scene. Notably, stronger growth in the US, disruption to supply in Nigeria and speculation are also having an impact. Theoretically, oil prices should not be rising in a climate of failing global growth, such as is being seen at the moment across Europe because crude oil demand should be falling away.

The current situation is the worst of all possible worlds, rising oil prices in a weak global economic climate. In two words – global recession.

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Rocketing oil prices could reach record levels soon, global recession looms

Geopolitics took the centre stage in the commodity sector, although improvement in macroeconomic data and the approval of the new bailout package for Greece also impacted market sentiment. Iran’s move to halt oil exports to the UK and France spurred worries about disruption of oil supply to European countries although the real demand of Iranian oil from these two countries was limited. Brent crude oil price jumped to the highest level in nine months. The prompt month contract rallied to a new record in euro term and close to a record in sterling term. As oil prices get more expensive, market concerns about the impacts on world economic recovery should emerge soon.

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Weekly Fundamentals – Rise in Oil Prices May Further Defer Economic Recovery

Despite a modest push shortly after the announcement that the EU approved the second Greek bailout package, European bourses closed in red as doubts remained. Wall Street climbed modestly higher with DJIA and S&P 500 gaining +0.12% and +0.07% respectively. In the commodity sector, crude oil prices rallied higher with WTI crude oil for April delivery jumping to as high as 106.48 before closing at 106.25, up 2.58% from Friday’s close of 103.6. The equivalent Brent crude contract jumped to as high as 121.88 before ending the day at 121.66, up +1.34%. The front-month contract for Comex gold gained +1.89% to settle at 1758.5.

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Oil Rallies on Greek Bailout and Iranian Tensions

The price of US WTI crude oil ends the week near $104 a barrel and could hurt the US economic recovery as tensions over Iran’s oil supply ban to Europe fuel oil prices, whilst gathering strength in the American economy could push oil demand higher as the summer draws closer.

WTI Oil – Closing Price

US Light crude oil futures for March 2012 delivery closed the weeks session at $103.91 a barrel on the NYMEX, or 1.3 percent higher on the day. The March US oil futures contract expired yesterday.

Cost of US Crude Oil

The cost of US crude oil has been rising steadily since hitting a seasonal low in October, gaining upward momentum on escalating tensions with Iran after a series of moves by the US and the EU to pressure Tehran to shut down a uranium enrichment program aimed at producing nuclear weapons.

Tensions over Iran’s recent ban on oil exports to several EU members states, together with the potential for major supply problems if the Strait of Hormuz sees any closure is driving up the cost of oil futures for both Brent and WTI oil.

“The Iranians have a lot at their disposal to upset this market, whether by embargoing the EU or even just creating some mischief. They don’t even have to block the Strait of Hormuz, they just need to sink a ship, lay some mines and be disruptive.” said oil industry analyst John Kilduff.

Brent Oil Price and Iran

In London, Brent North Sea crude for April delivery had hit $120.70 per barrel, its highest point since June 14th before pulling back to settle at $119.58 a barrel at close yesterday, down 53 cents from Thursday’s price.

“Greater risk appetite in the light of hopes of financial assistance for Greece, coupled with the Iran crisis, have caused the price of Brent crude oil to climb to an eight month high of over $120. Admittedly, Iran has denied reports of an immediate ban on oil shipments to the EU, yet consumers in Europe already appear to be preparing themselves for just such an eventuality.” said Commerzbank analyst Carsten Fritsch.

What’s Behind the Oil Price Rises?

According to industry sources, the leading European oil companies have slashed their March oil imports from Iran by more than 300,000 barrels per day. This is prompting additional demand for alternative oil types and is thus causing oil prices to rise.

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WTI oil price closes week near $104 a barrel could hurt US economic recovery

Brent oil futures open Tuesday’s trading session firm at $118 a barrel and European oil prices may well go higher after a Syrian oil pipeline which runs from the Rumeila fields in the eastern Syriac Desert to the Homs refinery, one of two in the country exploded after being bombed.

Latest Brent Oil Price

In London, Brent crude oil futures for April 2012 delivery was trading at $118.20 a barrel, 08.34 GMT today on the ICE Futures Exchange. The March Brent oil contract expired yesterday.

Syria Oil Pipeline Blast

State media blamed “armed terrorists”, but one activist group said government fighter jets had blown up the pipeline. Activists also said security forces had begun shelling the nearby city of Hama.

The blast sent up columns of black smoke over the central city, in what Abdullah said was the third such attack on the same pipeline, although this was the first time it was targeted from the air.

A video by Homs activists broadcast on social networking sites showed thick black smoke billowing from what appeared to be a residential area.

Several people had been injured by rocket and mortar fire in the districts of Arbain, Amiriya, Faraiya, Elilat, Bashura and Bab Qibli, and all telecommunications had been cut, they added.

Homs is home to one of Syria’s two oil refineries. It has also been one of the cities hardest hit by President Bashar Assad’s crackdown on the popular uprising that began in March.

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Brent oil trading firm at $118, Syrian oil pipeline explosion may boost prices