Commodity Blog

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Oil — Pure Speculative Recovery

September 27, 2011 at 17:53 by Andriy Moraru

Following a deep 3-day fall caused by the liquidity crisis combined with the global risk aversion, oil is now rising for the second day in a row. The commodity recovered to above Thursday’s open close level and last Wednesday’s high.

Although the extent of the recovery is impressive — more than 4.5 percent from the yesterday’s low, the reasons for this growth aren’t. Oil gained along with the rest of the commodities and stocks inspired by the speculations regarding the Greek debt crisis. After the US Federal Reserve refused to pour extra money into the world’s financial system, it’s now ECB‘s turn to raise or ruin the markets. If the European officials come to an agreement and the eurozone’s central bank will have its hands untied to provide more help (print more money) for the troubled states, the crude oil will be among the most benefiting assets.

While many analysts believe that it’s a viable reason to bet on oil (among the other oversold commodities), some warn the market participants about the possibility of the unfavorable outcome of the events. If Greece has to declare a real default or if some of the eurozone’s members will have to leave the union, the catastrophe for oil may be even worse than the 2008 financial crisis fall.

Brent oil blend went up from $104.63 to $106.27 per barrel on the spot market as of 17:50 GMT today. A monthly low of $101.66 was reached yesterday for this energy commodity.

If you have any questions and comments on the commodities today, use the form below to reply.

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