Forex Markets

Oil Outlook for March

Crude fell marginally on Thursday morning after hitting $80 a barrel on Wednesday evening, when the Federal Reserve Chairman Ben Bernanke described the US economy as being in ‘nascent' recovery and said that interest rates need to remain low for an extended period.

This development helped revive risk appetite, fuelling gains across equities and exerting pressure on the US dollar, which in turn increased the appeal of crude oil. ‘The equities correlation is starting to pick up again,’ said Carl Larry, president of Oil Outlooks & Opinions LLC. ‘As the Dow goes up, the oil goes up, and as the Dow goes down, the oil goes down.’

 [1] In the meantime, an important inventory report from the US Energy Department revealed that crude oil inventories climbed 3.03 million barrels last week to 337.5 million barrels, the highest level since November.

This was substantially higher than expectations for a 1.9 million barrel increase and suggests that demand for the crude oil was substantially weaker than feared.
This also contrasts sharply with the report from the American Petroleum Institute, which showed crude oil inventories falling by 3.14 million barrels last week. The government report showed an unexpected drawdown in gasoline inventories, however.

Gasoline supplies fell by 900,000 barrels over the period, confounding analysts who were anticipating a 500,000 barrel build up. News indicating further arctic weather conditions may also have boded well for crude oil on Wednesday, but fears over a Greek debt-rating downgrade on Thursday sparked a run back to the safety of the dollar, trimming the commodity’s progress.