The prices of oil may profit this week after data from the 2 biggest economies in the world confirmed that there was a stabilizing growth, but strategists caution leadership changes in the United States and China will pose the next few challenges and could weaken any rally if the policymakers do not give an evident road map on economic and fiscal change.
The debt woes of Europe will also persist to be on the radar with the parliament set of Greece to vote on unpopular structural and financial reforms on Wednesday, which are aimed at slashing the government expenses by 13.5 billion euros.
Sydney-based UBS’ head of investment strategy & consulting, George Boubouras stated that the US financial cliff would certainly need to be looked into as early as possible and cautioned that there would be little financial drag in the year 2013.
On Sunday, the leading global economies pressurized the US to act determinedly to prevent a dash of tax hikes and spending cuts, cautioning that the supposed ‘fiscal cliff’ is the greatest short-term peril to the global growth.
Around $600 billion of cuts in government expenses and tax hikes are unavoidable to start from January 1st, shoving the United States economy back into recession until and unless a fractious Congress can act quickly to reach an agreement following the elections in US on Tuesday.
Masaaki Shirakawa, the governor of Bank of Japan said that if the financial cliff is not resolved by United States, it would badly impact the US economy and also the global economy. So, every G20 nation will force the US to deal with it firmly.
On Monday, the futures of US crude (CLCV1 85.14 ∆ 0.28 (+0.33%)) drifted just below under $85 per barrel in premature Asian trading, as the investors stayed cautious before Tuesday’s US elections.
IG Markets’ market strategist, Justin Harper said that the company’s clients were presently trading oil, 80% have long positions, with the sensation that the energy markets have softened a lot.
According to the polls, Mitt Romney, the Republican challenger and Barack Obama, the President are gridlocked nationwide, though the president seemed to have a slightly better edge in the swing states, which will choose who will capture the 270 electoral votes required for the victory.
Few of the market watchers feel that such a close competition along with the ballot counting issues could fail to arrive at a decisive result. And, this vagueness could pressurize the oil markets, giving rise to short-term volatility, as said by Excel Futures’ president Mark Waggoner.