Lack of Concrete Stimulus from ECB Led to Current Oil Price Drop

The current oil prices dropped following failure of the European Central Bank (ECB) to make an announcement of any urgent action on the sovereign debt problem of the eurozone, leading to investors’ disappointment.

The main contract in the NYMEX for delivery in September ended at an oil price per barrel of $87.13, a rate that is lower by $1.78 compared to its closing level during the previous day.

In London, Brent North Sea for September delivery lost 6 cents to end at an oil price per barrel of $105.90. After a day of financial policy meetings, Mario Draghi, the president of the European Central Bank, did not reveal any concrete steps or propose any new solutions to relieve the eurozone’s debt crisis.

The major stock exchanges of Europe declined with the disappointment of traders that the central bank did not provide any fresh policy steps after its seemingly positive statements in the past week.

Analyst Myrto Sokou of Sucden brokers commodities said that the statement from Mr. Mario Draghi seemed confusing and led to more uncertainty over the unstable economic situation of the eurozone, as well as hurt the sentiment of investors.

Because of that, the euro faces pressure versus the U.S. currency, pushing investors to another set of market sell-offs, said Sokou.

A stronger U.S. currency makes the current oil prices, which are priced using the dollar, less appealing to buyers with weaker currencies, resulting to lower demand.

The price of oil recently rose, strengthened by a greater-than-expected fall in the crude supplies in the U.S. that ignited hopes for higher demand in the largest oil consuming nation.

The decision of the U.S. Federal Reserve to maintain the same monetary policy following a two-day meeting was largely expected. However, several investors who were expecting more stimulus for the economy were also disappointed.

By: Chris Termeer