Page 9 - MEOG Week 02
P. 9
MEOG FInanCe & InVestment MEOG
Oil prices rise – and fall
PrICes
THE early weeks of January saw significant movement in the price of oil.
Following the US airstrike that killed Iran’s top military commander it rose above $70 per barrel for the first time in four months; it was feared that the action might trigger a retaliation and disrupt global energy supplies.
The brent crude price hit $70.73 (GbP53.74), its highest level since Houthi rebels launched a drone attack on a major Saudi oil facility in September, with European stock markets also posting losses, including a decline of 0.6% on the FTSE 100 in London.
Markets eyed the long-term risk of conflict, and their concern was backed by new US sanc- tions on Iran which followed the missile strike on US forces in Iraq earlier in the week.
About a fifth of the global oil supply flows through the Strait of Hormuz, a choke point between Oman and Iran.
It was targeted last year by the Islamic Repub- lic, which seized two oil tankers in the strait. A prolonged oil price surge could raise the risk of a global economic recession and would add about 2p a litre to the price of petrol at the pumps.
However, the limited Iranian response and the unanticipated downing by missile of an Ukrainian passenger jet have caused both par- ties to retrench – and perhaps for wiser, calmer counsels to be heard.
With the possibility that there has been enough sabre rattling and accusations for the time being, the price of oil fell below $65 a bar- rel on Friday in its first weekly loss since late
November, erasing the week’s risk premium added since a US drone strike killed Qassem Soleimani, a top Iranian general, on January 3 as investors focused on rising US inventories and other signs of ample supply.
brent crude LCOc1, the global benchmark, settled at $64.98, down 39 cents; West Texas Intermediate crude CLc1 fell 52 cents to end at $59.04. For the week, brent sustained a 5.3% loss and WTI had a 6.4% decline, with both bench- marks now below where levels were before the US drone strike.
So far, there has been no disruption to Middle East oil production as a result of the flare-up in tensions and other indications this week suggest supply is ample. US government data on Friday showed job growth slowed more than expected in december.
Crude inventories in the US rose unexpect- edly last week and gasoline inventories surged by their most in a week in four years, the Energy Information Administration (EIA) said on Wednesday.
In a bid to tackle any build-up of excess sup- ply, the Organization of the Petroleum Export- ing Countries plus allies including Russia are embarking on a further cut in production as of January 1 this year.
Industry surveys, including from Reuters, showed that OPEC output declined in decem- ber ahead of the new pact.
Still, production remains higher than the forecast demand for early 2020, according to some analysts.
Week 02 15•January•2020 w w w. N E W S B A S E . c o m P9
