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The strength of the global recovery has being called into question these last few days, with sentiment heading south in the wake of recent signs of weakness in the Chinese economy.
Along with the fear that the Fed’s reduction in stimulus will hamper demand, these concerns have stung emerging markets, weakening their currencies and sending stock prices around the world lower.
Crude oil futures yesterday achieved their highest close so far this year, boosted by signs of strong fuel demand reported by hte US Energy Department and by forecasts calling for sustained frigid weather in the US, but the emerging markets story has outweighed these factors in today’s trading and by mid-afternoon in New York, crude oil futures for March had fallen 0.68%.
The flow of money out of emerging markets and into safe havens, such as gold, US Treasuries and the Japanese yen, has picked up pace as the week has progressed, with the resulting declines in riskier assets encouraging greater flight to safety.
Though slower growth in China may affect fuel demand in the long run, the short-term fundamentals should prove supportive in the US, with severe cold expected to last deep into next week, boosting heating oil consumption, which is a distillate of crude oil.