Commodities | Dec 16 2011
By Jonathan Barratt
The Oil market remains volatile as a result of a deteriorating macroeconomic picture and concerns in Iran. The ebb and flow is keeping the price in a US5 range.
Moody’s review on the credit ratings of all of the European Union together with expectations that economic growth in China is slowing down has seen oil under pressure, however concerns on the developments in Iran have kept it buoyant. So which one should we focus on?
At the moment we feel that we have to remain focused on the Chinese growth as the key to the future demand picture for Crude. China consumes close to 9.06 million bpd and in the world is the second largest consumer, just behind the US who consumes 19.1 million bpd of crude. As we have mentioned before the Chinese economy is broken up into two parts an internal and external economy. We can already see that the external economy is weakening as a result of issues in EU and US.
Recent exports numbers reiterate this as they rose less than expected hitting their lowest level since 2009. The internal economy also looks to be faltering as indicated by the sudden weakness in the RMB which suggests that funds are leaving the main land in a rush. Further industrial production which is a good indicator towards the consumption of oil slowed by a difference 0.8% when compared to the previous month. Although it was a positive number the figures represents the lowest number since August 2009. As such we can suggest that the outlook for the price of the commodity looks weak. So what about Iran?
Iran looks to be the only bullish story on the horizon. Iran due to the heavy trade sanctions imposed on the country we feel will be pushing OPEC at the next meeting (this week) to reduce production. However, given what’s on the agenda for an increase in the OPEC production ceiling we feel Iran's requested will be overruled.
Chart Point
The market remains range bound between US 97.50 and US 102.40 to the top side. As we trade to the lower end of the range the market may find support at US 95.00 however a break below this level will see further losses. Momentum indicators remain weak.
Produced by Jonathan Barratt direct from the trading desks of Commodity Broking Services, Barratt's Bulletin provides expert analysis of commodity markets, global indices and foreign exchange movements. Click here to take a no obligation 21-day trial to Barratt's or to learn more visit www.barrattsbulletin.com. Content included in this article is not by association necessarily the view of FNArena (see our disclaimer).
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