Crude oil prices have been falling today ending the uptrend. Prices had been rising since the beginning of the week due to a weakening US Dollar which makes it cheaper for investors buying it with other currencies since oil prices are quoted in US Dollars.
However, negative economic data coming out of major economies such as the US recently and the UK as well as Europe and China, has clouded the demand outlook, as slowing economies mean less manufacturing and less demand for oil. After the release of weak US jobs data and a drop in US manufacturing PMI today, crude oil fell from a morning highs of $103.29 to $101.60.
Speculators believe that losses will actually be contained by several factors such as Dollar weakness, supply disruption in the United States and violence in the Middle East.
A weaker dollar makes oil cheaper for those holding other currencies.
“If euro/dollar closes above a 50-day moving average it will lead to a bullish trend for the euro from here and there could be more positive momentum for oil,” Thorbjorn Bak Jensen, oil market analyst at A/S Global Risk in Copenhagen said.
Another factor halting crude oil to decline further is the recent pipeline disruption to a major U.S. oil hub in Cushing, Oklahoma .TransCanada Corp said it will take several days to re-open its 591,000 barrel per day Keystone oil pipeline to the oil hub after the second spill in less than a month forced it to shut at the weekend.
Meanwhile, continuing tension in the Middle East also is also supporting oil prices as investors worried about possible supply disruption if eventually unrest spreads to Saudi Arabia.
The OPEC meeting will be held next week and all eyes are on it to see whether any changes to oil production from major oil producers will be on the agenda. However, a Reuters survey found that no changes are likely.