Oil Prices Plummet Amid Fitch Ratings Warning

Strategic Insights -

Oil prices are experiencing a sharp decline on Tuesday, with the Brent contract on the ICE futures exchange falling 51 cents to $71.61 a barrel and the West Texas Intermediate contract on the New York Mercantile Exchange trading 21 cents lower at $71.23 a barrel. This reversal comes after Fitch Ratings warned of the UK's "formidable" fiscal challenge, which has pushed the pound and euro down against the dollar, causing European stock markets to tumble. Analysts predict that crude oil inventories will fall by 1 million barrels in the upcoming U.S. Department of Energy report, while gasoline inventories are expected to rise by 200,000 barrels, and distillate stocks by 300,000 barrels.

Key Takeaways:

  • Oil prices have been volatile since ending a three-week sell-off at the end of May, with July Brent losing $3.59 a barrel from open to close on Friday and July WTI shedding $3.10 a barrel.
  • The crude futures recovered ground on Monday and then early Tuesday morning, soothed by upbeat comments from Federal Reserve Chairman Ben Bernanke, but prices remained around $3 a barrel lower than the intraday highs on Friday.
  • UK's Fitch Ratings warning has pushed the pound and euro down against the dollar, causing European stock markets to tumble, and oil prices to fall sharply.
  • The American Petroleum Institute is releasing weekly crude oil stock data later on Tuesday, while the U.S. Department of Energy statistics are released on Wednesday, providing potential insight into the IEA monthly report that will come out on Thursday.
  • Analysts at Petromatrix believe that the API continues to have a strong divergence with the DOE on distillates, and the release of the DOE world supply and demand report may provide key insights into the global oil market.

Statistics:

  • Oil prices: Brent oil futures are trading 51 cents lower at $71.61 a barrel, while West Texas Intermediate futures are trading 21 cents lower at $71.23 a barrel.
  • Crude oil inventories: Analysts predict a 1 million barrel decline in the U.S. Department of Energy report.
  • Gasoline inventories: Expected to rise by 200,000 barrels in the U.S. Department of Energy report.
  • Distillate stocks: Expected to rise by 300,000 barrels in the U.S. Department of Energy report.
  • INTRADAY HIGH: July Brent traded at $72.70 a barrel, and July WTI traded at $72.18 a barrel.

Sources:

  • Fitch Ratings
  • Dow Jones Commodities News
  • London Capital Group
  • Petromatrix
  • U.S. Department of Energy
  • American Petroleum Institute
  • Dow Jones Newswires