Oil Prices Increasing Due to Global Tension

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By Chris Hillman on August 5, 2014 Energy & Solar

On Monday, the 4^th of August 2014, the price of oil escalated significantly as a result of the excessive deterioration that had occurred last week which had consequently brought to its attention numerous potential buyers. The investors now seem more interested in the situation in North Africa as well as the Middle East and are more focused on that as opposed to their uncertainty regarding the oil supplies.

Only last week, there was a 3.3% shift for Brent and on the Friday of the previous week, the price had become $104.84, which is the minimum it has gotten since April of this year. But on Monday, these lowered prices took a turn in the opposite direction and ascended. This is because the oil producing areas like Libya, Iraq and Ukraine are confronted with a struggling situation and are facing disturbance and disorder and have made the investors attentive and anxious.

Gene McGillian, an analyst who works for Tradition Energy, located in Stamford, Connecticut has commented on the situation saying that last week was the lowest the industry has been in the past four months and so obviously it is trying its best to remain steady and maintain an unfluctuating situation. But he added that the disadvantages the market has courtesy the agitation being witnessed in the oil producing countries cannot be ignored.

The current situation is that Brent crude has had a 52 cent rise and has now reached $105.36 for one barrel, springing back from $104.52, its lowest in the session. Similarly, US crude had a rise of 33 cents and reached $98.21, following a price of $97.43, their lowest of the session. North Sea crude has been in a contango situation since 2011 and their forward price has been higher than the expected price, indicating that the market has been kind to them.

Investors are biting their fingernails because of the situation in the oil producing countries, and for good reason. On Sunday, 20 people died in Tripoli because of the combat that took place to acquire control of the airport.

Oil production in Libya has declined to a highly prominent 450,000 BPDs (or the barrels that are produced in one day) from the already descended amount which was 500,000 BPDs last week. Even though a representative from the National Oil Crop has reassured the concerned people that Tripoli may be facing a difficult time due to the conflicts and disagreements going on but steps are being taken to keep the oilfields undisturbed and safe, the investors are not fully convinced. But National Oil Crop also admits that production has deteriorated and has expressed its fear of it turning uglier. Oil analyst for Commerzbank Carsten Fritsch has also commented on how he thinks Libya may have an oil production crisis if this continued.

However, in Iraq, the exports of oil escalated from 2.42 million BPD in June to 2.44 million BPD in July, even though the north of the country is in a state of upheaval and transportation of oil from Kirkuk and surrounding oilfields has been ceased. It is to be noted that Iraqi militants have captured the Al Zalah oilfield in Kurdistan (and their biggest dam) on Sunday.