Brent Follows the Equity Market, and Sinks With Posco and Faurecia
Brent crude oil prices tumbled on Tuesday morning, reflecting investor concerns about slowing economies. Brent traded at 109.16 on Tuesday morning, down from Monday's trading high around $111.
On Monday, prices were temporarily supported by new developments in the volatile Middle East, where violence in Lebanon and Israel caused concern about supply interruptions. The region's instability is centered in Syria, where ongoing fighting has spilled over into Turkey and caused artillery exchanges between the two nations.
As the tension in the oil rich region escalates, many fear supply interruptions in Northern Iraqi oil, which is delivered through pipelines throughout the area.
The tension in the Middle East was overshadowed on Tuesday morning, though. Worries about large oil-consuming economies facing sluggish growth were confirmed as major companies from Europe and China missed their price forecasts, causing a glum outlook for future earnings.
Bloomberg reported that Posco, a Chinese steelmaking company and Faurecia, the largest producer of car interiors in Europe, presented significantly decreased sales and profit forecasts for 2012. The data suggests that China and Europe have yet to recover from stunted economies, and causes concern for investors.
Markets have also been affected by crude stockpiles, at their largest since July. Between these inventories and Saudi Arabian oil output, many forecast that supply will be ample for the expected demand even if the Middle East grows more unstable.
On Wednesday, the U.S. is set to release data about new home sales in September which many are expecting to be at their highest in over two years. This could have a positive effect on oil prices, as it suggests that number one oil consumer, the U.S., may be on the road to recovery.
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