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Oil prices moved to new highs today as traders continue to weigh concerns coming out of the Middle East. After hitting a new high of $92.22 earlier in the session, prices are now trading up $1.25 to $91.71.The reasons for today's move are once again tensions in the Middle East, which have helped crude prices jump over 7 percent since Tuesday. There are several factors that are leading to rising prices, so let's take a closer look at each of these contributing factors.
The first factor is tension between Iraqi Kurds and Turkey. This began last week when Kurd rebels from Northern Iraq invaded Turkey and killed 12 members of the Turkish army. This has resulted in Turkey amassing around 100,000 troops along the border between the two countries. There have been reports that Turkey has been firing artillery across the border, and reportedly shelled three different villages in Northern Iraq yesterday.
There have also been reports of an altercation between Israel and Lebanon yesterday. Apparently the Lebanese army fired on Israeli warplanes. This raises the fear that if violence escalates then it would pull in some of the larger oil producers in the region.
Tensions have also been raised to new levels between the U.S. and Iran. Yesterday America imposed the largest sanctions against Iran since 1979 in its attempt to convince Iran to stop enriching uranium. Growing tensions between Iran and the U.S. definitely pose the greatest threat to oil supplies since America is the worlds largest oil consumer and Iran is the world's fourth largest producer.
OPEC also is adding to the buying frenzy. Yesterday the oil cartel announced that there will be no production adjustments at their next meeting. There had been some rumors coming out of Saudi Arabia that were leading traders to believe that a 500,000 barrel increase was coming effective November 1.
And the final, and presumably most important factor weighing on traders minds was this week's inventory report from the U.S. Energy Department. Analysts had been expecting to see around a 300,000 barrel increase in crude inventories last week, but were shocked when the report showed that inventories actually fell by a massive 5.3 million barrels. This is what initially triggered the massive move to the upside for oil prices.
How high will prices go? Can we expect to see crude bust through the psychological $100 barrier. I don't think so. At least not yet, but should we get another surprise next week from the Energy Department, or should more violence break out in the Middle East over the weekend, we could easily be here talking about $100 oil this time next week.
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)
10-26-2007 @ 2:00PM
alexhamzy said...
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10-26-2007 @ 3:46PM
michael schneider said...
The oil market is also looking ahead to the Fed rate cut. Many commentators are looking for 25 basis points and some are looking for 50.
Longer term the situation with Iran may be the most important factor- as John McCain noted recently, the moment of truth may be coming up there a lot faster than people think. Bloomberg today reported that many traders expect an oil price decline next week as the promised OPEC additions hit the market. I would think it depends on whether Turkey sends troops in to Iraq. In any case oil is moving fast-- maybe to fast.
CNBC today listed areas that will gain and areas that would be hurt by the high prices we have now-- the list is available free right now for those interested in Oil Alerts at http://www.Barrelomoney.com.
10-26-2007 @ 4:03PM
rick said...
This is an easy remedy. Just stop buying Middle Eastern oil.
These companies import Middle Eastern oil :
Shell............................ 205,742,000 barrels
Chevron/Texaco......... 144,332,000 barrels
Exxon /Mobil............... 130,082,000 barrels
Marathon/Speedway... 117,740,000 barrels
Amoco............................62,231,000 barrels
Citgo.......... ..............from South America , from a Dictator who hates Americans
Here are some large companies that
do not import Middle Eastern oil:
Sunoco...................0 barrels
Conoco..................0 barrels
Sinclair.................0 barrels
BP/Phillips............0 barrels
Hess.......................0 barrels
ARC0................. ...0 barrels