Oil prices are off to a strong start this week, rising above $85 a barrel to $85.02. Earlier in the session prices were all the way up to a new record high $85.20.
Over the past couple of weeks when I have written on oil prices, I have cautioned against assuming oil prices would have to retreat from their recent strong runs. The main reason why I caution against that idea is that there are a couple of factors out of our control right now that could at any point in time lead prices higher. These include (but are not limited to) weather and political unrest. We are in the hurricane season now, and any large storm that forms will result in higher prices. But this not what is behinds today's move.
Today's price jump is in direct reaction to political unrest around the country of Iraq. Yes, I know that hearing about instability in Iraq is nothing new, but what is new is that the most recent tension is not the battle between the U.S. and Iraq. Today's concerns are of mounting tensions between Iraq and its northern neighbor Turkey.
Last week, fifteen soldiers in Turkey were killed after being hit by attacks from Kurdistan Workers' Party rebels. The Kurdish camps are located in the northern territory of Iraq, which is the site of the world's third largest oil reserve. Later this week Turkish lawmakers will hold a vote to determine if Turkey will allow military action against the Kurds.
Naturally, any increase in tensions between the two countries will continue to push prices higher and we could easily head to $90 oil before you know it.
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
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Reader Comments (Page 1 of 1)
10-15-2007 @ 12:25PM
michael schneider said...
CNBC reported today that there could be a loss of a million barrels of oil a day through the pipeline that runs through Iraq-- other sources have said there will be no impact because insurgents have already been able to stop much of the oil flow. There seems to be some confusion but the market has its own clear view.
In any case the surprisingly bullish oil inventory numbers (see Oil Alerts at http://www.Barrelomoney.com) set things on an upward trajectory last week. I think you are right about the rally. The fact that many analysts and traders on CNBC and elsewhere have been skeptical of the rally may be forcing many of them to now alter their positions-- we could get some short covering in both the futures and the stocks. With another round of inventory numbers which have been bullish lately and a decision from Turkey coming later in the week, it does not seem a good time to bet against the rally. We also have the US buying for the Strategic Petroleum Reserve to make up for the suspension of purchases because of hurricane Katrina. Still, commodities sometimes act weird and oil really has moved a lot making it increasingly risky to play the upward moves.
10-15-2007 @ 6:53PM
Thomas said...
The dollar has dropped below 0.012 barrels.