Crude markets gave up earlier gains after the dollar strengthened against a basket of major currencies, reversing an earlier trend that saw front-month Brent futures briefly regained its footing above $70 a barrel. Oil prices tend to retreat when the greenback strengthens as dollar-denominated commodities such as crude become more expensive for investors holding other currencies.
| Meanwhile, there was hope that colder weather in the northern hemisphere, bargain hunting by traders and a hiatus in the dollar rally could help crude recover from last week’s losses. |
Energy markets were under severe pressure yesterday from developments in the Eurozone. Portugal was unable to
sell all of its intended €500B in T-bills due to low demand and reduced the offering to €300B. Credit default swaps in
Portugal rose to their highest level on record and combined with Wednesday’s events in Greece to offer strong
pressure on the euro. On Wednesday, the EU accepted the austerity plan proposed by Greece to bring its deficit-to-
GDP ratio down to below 3% from 13% currently by the end of 2012. Markets don’t have much confidence in that
happening though, and created further widening of Greek bond spreads to Bunds. The market reactions come on the
back of Wednesday’s article in the UK Telegraph suggesting that Greece is rattled by hidden debts. When combined
beneficiaries of safe haven flows have been the dollar and U.S. Treasuries. These worries are unlikely to fade soon,
and could maintain pressure on the energy markets.
Hornsby Trading News
- MARKET TALK: ICE July Brent Struggles To Extend Gains Dow Jones May 21st.
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- NOAA: Above Normal June-August Temperatures Seen For Southern Half Of US
- Weekly DOE Inventory Report – May 16th.