Crude Oil Price Update-Oil Declines As Dollar Strengthens, Euro Zone Crisis Worsens

Crude oil tumbled on account of a rising US Dollar and fears about a reduced global oil demand. WTI crude futures declined by 0.77 percent to USD $ 98.820 a barrel. Brent crude futures fell by 0.64 percent to USD $ 118.81 a barrel.

The Dollar Index, which tracks the value of the US Dollar against six other major currencies, increased by 0.9 percent to 76.13. An appreciation of the US Dollar increases its value to investors and leads to a decline in the price of commodities.

The outlook for global oil demand does not appear healthy. The debt crisis in Europe seems to be becoming worse. Greek government bond yields have reached record high levels, while the country has also failed to complete its austerity plans in order to curtail its budget deficit.

Apart from Greece, the situation in the rest of the European region doesn’t appear healthy either. Fitch’s Ratings has lowered Belgium’s credit rating, while Standard & Poor is contemplating doing the same to Italy’s credit rating. Also, the ruling Socialist Party in Spain suffered its worst defeat in the recently held elections since voters were unhappy with the austerity measures taken by the government to fix its budget deficit. A shift of power to the opposite has increased speculations about Spain’s ability to fix its deficit issues properly.

In China, the manufacturing index declined to its lowest level in 10 months, a sign of the economy slowing down after the government raised interest rates in order to control inflation.

With China and Europe not showing signs of a healthy economy, investors are fearful about demand for oil falling, which has led to the decline in the price of the oil futures.