Oil’s rally has been left far behind, with prices continuing to drop as risk sentiment remains hard to find.
 
The eurozone crisis, which has now evidently spread to Germany following yesterday’s failed bund auction, continues to be the main driver of weak sentiment, with even a drop in US supplies failing to lift prices. Being Europe’s, and the eurozone’s, largest economy, means that German bonds have become the de facto safe haven, but investors are now worried about the impact of the crisis on the German economy. Concerns about conflict in the Middle East have abated somewhat, as news about Iran getting closer to the production of an atomic bomb is replaced by the unrest in Egypt and Syria, but also helping to drive down prices was an unexpected drop in Chinese manufacturing activity.
 
The HSBC flash manufacturing PMI dropped from 51 to 48 in October, its largest fall in 32 months, raising concerns that demand from this vital quarter will ebb somewhat. However, there was at least some good news for oil bulls, as US crude stocks dropped last week, down by 6.2 million barrels to 330.8 million barrels. This is 8% below the level seen last year, according to the US Department of Energy. So long as the eurozone debt crisis and the US budget talks continue to drag on interminably, risk appetite is most likely going to remain sharply lower, which could see NYMEX extend its losing run for the moment.