Today's close above $70 marks the first time in almost a year that prices have been at this level, with the last time oil was above $70 being back in August '06. The primary reasons behind the move today were more of the same that we have seen lately... concerns over gasoline surprises and political tensions around the globe.
American refineries have been the center of attention over the past couple of months with concerns over how well refineries are going to be able to keep up with the growing demand during the peak summer driving months. This week those concerns were once again brought to the surface after the weekly inventory numbers out of the Energy Department showed n unexpected decline in gasoline supplies. Analysts had been expecting to see a rise of 1.1 million barrels when in fact the numbers showed that gasoline stocks fell by 700,000 barrels.
Another factor that was weighing on traders minds today was the multiple bomb scares that we saw in London. After authorities identified two cars loaded with explosives on busy London streets, concerns mounted that this may just be the tip of the iceberg with more possible car bombs threatening the city.
The funny thing about terrorist activities is that the impact of the "attack" is not really what the terrorists are after, its the psychological effect, and in this case even though the bombs were unsuccessful, it did achieve the ultimate goal, which was to cause fear and concern across the country which had a ripple effect through the markets as well.
Another alarming situation is developing in the Arctic Circle. Rumors are swirling that Russia is preparing to announce that they were laying claim an enormous oil rich segment in the Arctic Circle, including the North Pole. It is no secret that Russia has been taking strong steps in nationalizing its oil supplies, and now with this possible move to claim part of the North Pole as Russian territory some people are suggesting that Russia will have gone just a bit too far, fueling an already tense relationship between it and the United States.
Are we looking at the beginning of another possible "Cold War". For now that's not something to even consider in my opinion, but people are starting to ask the question, and from my point of view, once a question like that even starts to be asked you know that things are far less than ideal in the world.
In a related story, Russia announced that they successfully tested a new sea-based ballistic missile yesterday with a range of 6,200 miles and carry six individually targeted nuclear warheads, marking the second test in a month on new missile technology. George W. Bush and Russian President Vladimir Putin will be meeting on Sunday and Monday to discuss the growing rift between the two nations.
Even with oil spiking and gasoline inventories still weighing on the mind of traders, gasoline prices at the pumps are remarkably still falling from the record highs we saw earlier this year. After setting a high of $3.227 back on May 24 prices continue to come back down with more declines last night driving prices down to "only" $2.97.
So, that's about it for today... we will surely pick up this never ending story on Monday and see if prices are able to continue this momentum into next week. Enjoy your weekend.
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.