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Jul 24 2012
World Economy: Crisis Aplenty

The European crisis is again at the center stage with Greece having only a little hope of another round of bailout package and Spanish borrowing cost reaching a yield of 7% on long term borrowings.   These surmounting crises have led the Euro to become weakest against the USD in the last two years. Spain had received an aid package in June by the European Central Bank which also did not put any upward pressure to the European currency. The oil prices that were speculated to rise amidst continuing Middle East crisis fell down with news from the Euro zone and also from the second largest economy of the world, China, who have not shown any positive signs of economic recovery.

Crude Futures on the New York Mercantile Exchange fell down to $ 88.78 a barrel and was $88.76 at 2.43 PM on Sydney time. Prices are 10% lower than the previous year. The Crude futures on Thursday, July 19, rose to nearly $3 per barrel to $ 92.66 which could have been due to the increasing tensions in the Middle East. However this week, with European crisis looming again upfront and Chinaís economy also signaling a worst slowdown after 2009, has made the oil futures hit the lowest price for the week.

China, the second largest economy of the world and the second largest consumer of crude oil, has shown a bleak economic position. The GDP for the upcoming quarter is estimated to fall down to 7.4% next quarter which stood at 7.6%. With such an impression coming out from the consumer of nearly one third of the global oil supply-what else could be expected than a rallying down price of that commodity?

The deepening European debt crisis has also given a negative outlook for the commodity demand; especially oil. The Euro has fallen down to $ 1.2067 by 0.7% which is estimated to be the lowest since June 2010. The European Commission, the IMF and the ECB will soon meet in Athens to determine the future of Greece. The Troika however is very skeptical about the rescue of Greece and further bailout package seems unaffordable since Greece is sure to default on its bailout obligations.

On the one hand the Chinese economic slowdown and European debt crises have been pushing down the prices of oil and commodities like copper, the surging Middle East tensions on the other hand will only have a reverse impact on the prices. With such mixed market information, the future of oil only seems to be more volatile in the forthcoming days.

Note: The blog is just an expression of the authorís opinion and cannot be deemed responsible for any losses incurred.

 
Posted by Mex R&D at 24/7/2012 1:46:26 PM
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