This week was a mysterious one for oil prices, which took a very sudden dive on Monday, and continued on a downward spiral over the next two days, rebounding a bit on Thursday and Friday after the largest decline in three months.
Prices were driven by a number of factors, though the reasons behind Monday’s sudden drop remain elusive, while the drop in prices on Tuesday and Wednesday were largely guided by speculation over Eurozone economic instability, bad news from FedEx and announcements coming out of Saudi Arabia that OPEC would continue to maintain high production levels, even as US supplies remained unusually high.
A rebound in oil prices on Thursday and Friday was triggered primarily by the US jobs market. On Thursday, a Federal Reserve policymaker proposed keeping interest rates low until unemployment declines sharply, otherwise the risk of inflation is too high. The rebound also reflected speculation over Spain’s announcement that it would unveil a new economic reform plan next week.
In other fossil fuels news, analysts predict a renewed energy boom thanks to a rejuvenation of oil production in the US Gulf of Mexico, which could see a 28% increase in oil flow by 2022 to 1.8 million barrels per day. According to industry analysts, we are now about to see a major come-back after the disaster of the Deepwater Horizon oil spill.
On the policy front, the US House of Representatives is set to render a final vote on coal today, after a debate session yesterday. GOP legislation is hoping to scrap federal greenhouse gas rules and reverse what they call the Obama administration’s “war on coal” for its potential to harm the economy.
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By Oilprice.com Editors
