Crude oil futures were in decline today under pressure from yesterday’s downward revision of the outlook for US government debt rating to negative by Standard & Poor’s and China’s latest monetary policy tightening move.
As was expected, the Chinese government responded to last week’s update on inflation by upping reserve requirements for banks by another 50 basis points. The move was announced on Sunday and will come into effect on Thursday.
It was reported last week that China’s consumer inflation accelerated to 5.4 percent in March.
The US and China are the world's largest consumers of crude oil.
The long term impact of the ongoing civil war in Libya on oil supplies seems to have already been priced in as is it widely accepted that it will likely be a long time before the North African country is able to resume oil exports after the war is over.
US light, sweet crude for June delivery, which is currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), declined to US$107.35/barrel, while July crude dropped to US$107.76/barrel.
