The global oil prices have plunged yesterday as a result of slow economic growth forecast and the dampened growth of world's biggest crude consumer, the US. Rising fears about the current credit crisis and the US ongoing recession, is supporting the drop of oil prices. As the global stock market recorded gains due to JPMorgan Chase raising its offer for Bear Stearns to $10 a share from $2, more and more traders are leaving the commodities market and investing in the stock market pushing the price of crude to continue declining. The contract shed $0.98 closing at $100.86 per barrel after reaching a high of $102.42 per barrel and a low of $99.95 per barrel.
Today, as the dollar is gaining its strength in the market and since the US existing home sales came out yesterday showing better than expected readings, crude is loosing its grounds. Oil is known as a hedge against inflation and the weak dollar and as we witnessed that the dollar is starting to rebound, this undermined the demand for oil in the market causing it to dip even lower. Investors are now more attracted to the greenback and leaving the dollar backed commodities as confidence is slowly restoring in the economy. The crude market opened at $100.43 per barrel reaching a high of $100.48 per barrel and a low of $99.66 per barrel.
This current drop in crude prices is believed to be only temporary and that prices will start inclining again if the Feds cut the interest rates once more as projected. As lower interest rates deteriorates the dollar, traders will flee to the crude market causing prices to start surging, as this is believed to be only a correction. The medium term outlook for crude will leave investors satisfied and consumers in fear as high oil prices is a major sign of inflation.