Political Tensions, Economic Reports and Weather Forecast Push Crude Oil Prices

Political Tensions, Economic Reports and Weather Forecast Push Crude Oil Prices
Political Tensions, Economic Reports and Weather Forecast Push Crude Oil Prices
Crude oil is trading at 103.64 gaining 42 cents this morning as Egypt remains the central focus of the markets, but ongoing crisis in Turkey and Syria continue to flourish. Death tolls from Syria and Turkey were the headlines of the news this morning. Speculators as well as ordinary people from around the globe continue to watch these situations closely, as Egypt continues to try to find a way to appease all parties and form a government. The biggest worry is the possibility of a regional uprising, while any disruption in crude oil supply could upset markets easily, with Egypt the largest country in the region and holding control of the pipeline and the Suez Canal, violence could easily upset the flow of oil.

The escalation in the Egypt could be among the factors pulling up the price of oil on account of the concern regarding the potential blockage of the Suez Canal, in which nearly 3.8 million barrels per day transport through it. Keep in mind, in 2011 Arab spring that also erupted in Egypt, the Suez Canal remained open. Therefore, the current developments in Egypt are less likely to affect the shipment of oil via the Suez Canal.

The prices of oil (WTI and Brent) continued their rally during last week. WTI increased by 6.9% while Brent oil also increased by 5.44%. As a result, the gap between the Brent oil and WTI moderately contacted; the gap between Brent and WTI ranged between $4 and $5. The latest EIA weekly update showed that oil stockpiles declined by 14.6Mb. Conversely, refinery inputs and imports rose while production edged down during last week. This week, several reports may affect the oil market. These items include: minutes of FOMC meeting, OPEC and IEA oil reports, the developments in the Middle East, and EIA oil weekly update.

OPEC’s upcoming report will show of any changes in crude oil and natural gas’s supply and demand worldwide; the report will also show the changes in OPEC countries’ oil production quota during June 2013; this news may affect oil prices. The report will be published on Wednesday, July 10th. The IEA Monthly Report will present an updated (for August) outlook and analysis for the global crude oil and natural gas market for 2012 and 2013. The data is due on Thursday, July 11th.

During last week, the EUR/USD fell again by 1.39%; moreover, the AUD/USD also slipped by 0.78%. The correlations among these currencies pairs and oil prices contracted. The effect of the forex market on oil price seems to have diminished in recent weeks.

Natural gas is trading at 3.644 gaining 29 pips following market sentiment as excess production will be shifted to lower priced commodities increasing the demand for natural gas as it is the cheapest energy substitute. News of a weather situation is also causing higher prices for both crude oil and natural gas as traders stress when storms are predicted. A tropical storm may develop in the mid-Atlantic early this week, according to the U.S. National Hurricane Center in Miami. A collection of severe thunderstorms and low pressure about 1,050 miles east-southeast of the Windward Islands has a 70 percent chance of becoming a tropical storm or depression in the next two days, according to weather outlook from the center.

 

 

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