Crude Oil Price outlook: Euro breaches 1.34, oil to head lower?

Crude Oil broke through 86 yesterday. Today Euro broke through 1.34 against the USD and hit 1.3357 USD per unit, according to WSJ. Part of the slide was Europe opening up after the Easter break, but what does this mean for oil? At this rate the translation effect we all speak off (what does a barrel of oil costs across different units of currencies) should reduce even further as Euro heads towards the new low of 1.24 and the rally we have been seeing in crude oil prices should at least sputter, if not die.

If we take a look at Nauman Khan’s (at InvestBank) note on crude oil prices that was covered on CNBC, Karachi, today, here is the table of factors Nauman is tracking that he thinks impact crude oil prices now and in the coming months.

One factor missing in this table that Nauman covered in his presentation was the removal of subsidies on petro-chemical products in phases across some of the larger developing economies. Nauman’s estimate is a gradual rise of about 21% in prices if subsidies were completely eliminated in the Indian and Chinese markets, which should create some elasticity in demand, implying an actual reduction as prices rise versus the projected rise being suggested by EIA.