Crude Oil and USD fundamentlas

Crude Oil

Bullish factors for crude oil prices yesterday included
(1) the decline in the dollar index to a 1-week low,
(2) comments from Libya's top oil official that OPEC should make "substantial" output cuts when it meets next week,
(3) the rally in global equity markets, and
(4) speculation that President-elect Obama's pledge to create the biggest US public works program in 50 years will increase energy demand.

The main bearish factor for crude oil prices yesterday was continued concern about the weakening global economy, which should curtail overall crude oil demand.

US Dollar

Bearish factors for the dollar yesterday included
(1) reduced flight-to-safety demand into the dollar as global equity markets rallied, and
(2) President-elect Obama's talk of more fiscal stimulus and his pledge for a mammoth US infrasructure spending plan, which could ease the global credit crisis and thus reduce demand for dollars.

Bullish factors for the dollar yesterday included
(1) the prediction by Deutsche Bank AG that the ECB will cut its benchmark lending rate to 0.75% by the middle of next year as the European economic situation continues to deteriorate,
(2) the larger-than-expected decline of -3.8% y/y in Oct German industrial production, which was the largest y/y decline in 6-1/2 ye ars, and
(3) the larger-than-expected fall in the Dec Euro-Zone Sentix investor confidence to its lowest level since the data series began in July 2002.

Crude Oil - Important fundamentlas factors

Bearish factors include OPEC's decision over the weekend to wait until its December 17 meeting to decide whether to cut production another notch. OPEC called on non-OPEC producers such as Russia, Norway and Mexico to help with a production cut and to underpin crude oil prices.

Jan crude oil prices last Friday closed -1 cent at $54.43 and Jan gasoline prices closed +0.88 cents at 120.96 cents.

Bullish factors last week included

(1) the sharp rally in global stocks, which reduced pessimism about the global economy,

(2) the likelihood for an eventual OPEC production cut, and

(3) some short-covering after crude oil prices were able to stabilize for a week.

Bearish factors included

(1) OPEC's dithering over a production cut,

(2) OPEC President Khelil's comment that some OPEC countries can't find buyers for all their oil, and

(3) continued exp ectations for weak global economic growth and fuel demand.