CAC 40 Takes An End-Of-Day Dive On Oil News
The CAC 40 looked like it was going to have a strong day in the market on Wednesday. However, toward the end of the day, two big stories with regard to oil broke, dragging the index downward. Today, we’ll talk about those stories, why they caused the CAC 40 to take a dive, and what binary options traders should be watching for ahead.
Oil News Causes CAC 40 Blues
As mentioned above, the CAC started the day off strong before late-in-the-day news surrounding oil sent the index into the red. Ultimately, there were two different bits of news surrounding oil, and both of them were unfortunate. Here’s what we saw…
Political Conflict Turns Ugly – First and foremost, we saw a bit of a political conflict spike up between two key oil producers, Iran and Saudi Arabia. According to various reports, Iran’s Revolutionary Guard has turned on Saudi Arabia. At the end of the day, Iran has accused Saudi Arabia of being part of two attacks by Islamic State terrorists that led to the death of 12 people in Iran’s parliament.
Of course, these accusations were met by rejection from Saudi Arabia. In fact, Saudi Arabia claims that Iran is the primary sponsor of terrorism around the world. Iran also said brought the United States into the discussion, pointing out that the attacks happened shortly after a meeting between the United States and Saudi Arabia.
Ultimately, this proved to be a pain for oil. After all, both Saudi Arabia and Iran are OPEC members. Not to mention, they just so happen to be two of the largest members of the oil cartel. If the two can’t get along, it will threaten the OPEC deal to reduce the production of oil, which could lead to more supply in an already oversupplied world.
US Crude Inventories Climb – The second bit of bad news that hit the oil industry had to do with inventories in the United States. A report was released today showing that crude oil commercial inventories in the country rose by 3.3 million barrels during the week of May 26th. Analysts had expected for the inventories to fall by 3.5 million barrels. Increasing supply creates further supply and demand concerns for oil. As a result, we saw sharp declines shortly after the report was released.
What This Has To Do With The CAC 40
At first glance, it may seem as though this has little to do with the CAC 40. However, that notion couldn’t be further from the truth. The truth of the matter is that the CAC 40 is heavily dependent on the oil industry. While there is only one company that deals directly in oil and gas listed, if you take a look at the components of the index, you will see several banks and services companies that provide services to oil companies. Unfortunately, when oil falls in price, banks and companies that provide services to the oil industry are likely to see less business out of one of the world’s largest industries. As a result, they tend to feel the pain as well. This is ultimately what’s causing declines in the CAC 40.
What Binary Options Traders Should Be Watching For Ahead
Moving forward, binary options traders should be keeping a close eye on the CAC 40. In particular, pay close attention to what’s happening in the oil industry. As you can see, oil news will lead to movement in the index. Also, pay close attention to the UK elections and the ECB meeting, both of which take place on Thursday, June 8th. Any updates on any of these stories will likely lead to movement in the index.
What Do You Think?
Where do you think the CAC 40 is headed moving forward? Join the discussion in the comments below!