Brent crude fell below USD 112 a barrel on Wednesday, five dollar down from its peak last Friday. Concerns over the capacity of a fragile global economy to support demand and indications that the world’s top exporter, Saudi Arabia, is pumping more oil to bring down prices, have weighed in on oil markets. Prices hit a 2012 low at 88,49 in June and have since increased 27 percent. Automatic trading executions where one big sell order was followed by thousands of small, also contributed to the tumble.
The trading week is off to a weak start after the market bonanza experienced by the resolute actions from the European Central Bank, ECB, and the US Federal Reserve, FED, seem to fade. Both central banks undertook last week resolute economic stimulus actions. The last days worries about the debt crisis in Europe focused on Spain and a possible Greek Euro exit have along with fears for a hard landing in China kept investors funds on the sidelines.
Equity investors seem confused to which direction markets shall take. Europe fell yesterday on profit taking and question marks regarding whether the stimulus injections are enough to turn global markets around. These concerns were highlighted by a small, but vocal minority of FED officials opposing fresh stimulus and asking if the monetary measures have been taken, too, early; if a car is stuck in the mud, you continue to push till the wheels start turning; one official stated. The US stock markets were flat yesterday. Asia is also negative.
Representatives for the organization of oil producing countries, OPEC, stated on Tuesday that Saudi Arabia, a close ally of the United States, wanted to give the markets a clear signal for lower prices. Saudi has increased its daily production to 10 million barrels a day. Metal and precious metal prices were also influenced by the downward trend in oil. Gold fell to 1750 from its 1779 peak and trades between 1750 and 1770. Euro/USD is gaining Wednesday morning at 1.3071 trading in a new interval; 1.30 – 1.31. The Japanese Yen is falling as a result of the expected intervention from the Bank of Japan, highlighted in the Daily Report yesterday. USD/JPY is falling close to one percent trading at 79,18.
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