Over the last month oil prices rose by 10% with the support of several events. Saudi Arabia has cut down its oil output. The fiscal cliff issue is not yet solved despite the further developments and a key pipeline has reversed recently. Despite the impressive gains, the current oil price performance is not expected to continue in the longer term.
At the start of this week the finalization of main US pipeline expansion project will cut oversupplied inventories in the United States. Oil price rose on the back of this positive data form biggest crude consuming nation in the world.
Dollar priced oil were cheaper for buyers using stronger currencies as the greenback lost its value power. Many dealers took advantage and respect came in aid to the crude demand.
About midday in London the Brent crude contract for delivery in February rose by 62 cents to trade at $111.26 a barrel per barrel.
Light sweet crude for February delivery climbed by 66 cents to reach $94.22 per barrel on the market in New York.
The prices of US crude oil reached about $94 per barrel last week in contrast to the $85 per barrel registered in the early December. Here are drivers which caused this impressive rise in prices:
A reversal of the seaway pipeline has taken place last week. The pipeline that used to run supplies between the Gulf Coast and Cushing carries crude out of Cushing now. The upward trend in the US production drove hunger for crude oil at major storages and pipelines. This reversal strategy has to satisfy the demand as this pipeline is a milestone for US crude delivery.
Additionally in 2013 Saudi Arabia has cut down its oil output by nearly 1 million barrels.
This includes the 400,000 barrel cut from December which was announced during last week.
Last week China has presented firm economic growth data that point out rebound in manufacturing sectors from December and healthy export volumes.
Another great factor is the temporarily aversion of the fiscal cliff spending cuts which the
United States has to solve soon enough in order to prevent the further economic recession. The aversion even temporarily caused stable support to the oil price growth.
Last but not least – with the beginning of 2013 the confrontation with Iran for its nuclear program seems very close. If this happens, the crude prices will soar jump even higher.