Recent Drop in Current Crude Oil Prices Caused by Lower Spanish Credit Rating

Crude oil prices recently dropped as concerns over the euro zone’s oil demand renewed following the lowered rating of Standard & Poor to Spain. The market focused on the United States’ economic growth estimates for the first quarter.

Dennis Gartman, an independent commentator, said that a part of the energy market’s trading is focused on the foreign exchange markets, on the news coming from Spain and on the downgrade from Standard & Poor.

In the ICE futures exchange of London, the recent front month June Brent current crude oil prices was lower by 36 cents or 0.3% at a per barrel price of $119.56. A similar 0.3% drop occurred in the New York Mercantile Exchange as crude traded lower by 31 cents for an oil price per barrel of $104.24.

The recent investment grade rating of Standard & Poor for Spain was lower by two levels as it cited higher risks from an economy that seemed to grow weaker by the day.

Commerzbank noted that the downgrade has ruined the recently positive sentiment in the market. ┬áStandard Bank’s James Zhang said that the latest rally in Brent crude futures was mostly technical.

According to Commerzbank, without the financial markets’ support, oil prices will most likely present weaker tendencies because of easing geopolitical tensions and surplus in oil supply.

Economic challenges raise fears that oil demand may be weaker compared to the previous forecast.

Attention will also be focused on the advance economic growth estimates for the United States in the first quarter. The country is considered as the biggest consumer of oil worldwide.

Andrey Kryuchenkov, analyst of VTB Capital, said that they will be keeping an eye on the developments around the talks on Iran’s nuclear program and Tehran’s alleged new offer.

The latest gas contract for delivery in May in the ICE was lower by 0.7% or $7.50 for a price of $1009.75 a metric ton. In Nymex, May delivery gasoline prices were lower by 0.3% or 102 points for $3.1731 a gallon.

By: Chris Termeer