By Russell Glaser – Spot crude oil prices jumped to a two week high on Thursday following a Chinese commitment to European investments, in particular European debt instruments. This propelled traders into riskier investments such as commodities while selling the dollar. Markets have shrugged off most recent negative economic data as this was the case yesterday.
The price of spot crude oil rose to $75.39, following an opening price of $71.50. Spot crude oil trading has risen 9% over the past 3 days.
The rise in prices comes on the heels of a sharp $20 decline following fresh worries over the solvency issues surrounding Greece, Portugal, and Spain.
Yesterday’s gains in spot crude oil trading were driven by comments from China’s State Administration of Foreign Exchange (SAFE). The agency denied reports that it is reducing its holdings of European debt. Comments from SAFE also helped to support the euro as the EUR/USD rose to a high of 1.2393. The price of spot crude oil typically trades in a negative correlation with the dollar. As the dollar weakens, spot crude oil prices rise.
Spot crude oil prices could continue to increase upon further signs of economic improvement. Yesterday’s downward revision of 1st quarter U.S. GDP did little to halt spot crude oil bulls.
Next week’s U.S. Non Farm Payrolls report will provide further insight as to where the economic recovery stands. Positive results will likely mean spot crude oil prices rising to the $80 level.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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