• 2 days U.S. On Track To Unseat Saudi Arabia As No.2 Oil Producer In the World
  • 2 days Senior Interior Dept. Official Says Florida Still On Trump’s Draft Drilling Plan
  • 2 days Schlumberger Optimistic In 2018 For Oilfield Services Businesses
  • 3 days Only 1/3 Of Oil Patch Jobs To Return To Canada After Downturn Ends
  • 3 days Statoil, YPF Finalize Joint Vaca Muerta Development Deal
  • 3 days TransCanada Boasts Long-Term Commitments For Keystone XL
  • 3 days Nigeria Files Suit Against JP Morgan Over Oil Field Sale
  • 3 days Chinese Oil Ships Found Violating UN Sanctions On North Korea
  • 3 days Oil Slick From Iranian Tanker Explosion Is Now The Size Of Paris
  • 3 days Nigeria Approves Petroleum Industry Bill After 17 Long Years
  • 4 days Venezuelan Output Drops To 28-Year Low In 2017
  • 4 days OPEC Revises Up Non-OPEC Production Estimates For 2018
  • 4 days Iraq Ready To Sign Deal With BP For Kirkuk Fields
  • 4 days Kinder Morgan Delays Trans Mountain Launch Again
  • 4 days Shell Inks Another Solar Deal
  • 5 days API Reports Seventh Large Crude Draw In Seven Weeks
  • 5 days Maduro’s Advisors Recommend Selling Petro At Steep 60% Discount
  • 5 days EIA: Shale Oil Output To Rise By 1.8 Million Bpd Through Q1 2019
  • 5 days IEA: Don’t Expect Much Oil From Arctic National Wildlife Refuge Before 2030
  • 5 days Minister Says Norway Must Prepare For Arctic Oil Race With Russia
  • 5 days Eight Years Late—UK Hinkley Point C To Be In Service By 2025
  • 5 days Sunk Iranian Oil Tanker Leave Behind Two Slicks
  • 5 days Saudi Arabia Shuns UBS, BofA As Aramco IPO Coordinators
  • 5 days WCS-WTI Spread Narrows As Exports-By-Rail Pick Up
  • 5 days Norway Grants Record 75 New Offshore Exploration Leases
  • 5 days China’s Growing Appetite For Renewables
  • 6 days Chevron To Resume Drilling In Kurdistan
  • 6 days India Boosts Oil, Gas Resource Estimate Ahead Of Bidding Round
  • 6 days India’s Reliance Boosts Export Refinery Capacity By 30%
  • 6 days Nigeria Among Worst Performers In Electricity Supply
  • 6 days ELN Attacks Another Colombian Pipeline As Ceasefire Ceases
  • 6 days Shell Buys 43.8% Stake In Silicon Ranch Solar
  • 6 days Saudis To Award Nuclear Power Contracts In December
  • 7 days Shell Approves Its First North Sea Oil Project In Six Years
  • 7 days China Unlikely To Maintain Record Oil Product Exports
  • 7 days Australia Solar Power Additions Hit Record In 2017
  • 7 days Morocco Prepares $4.6B Gas Project Tender
  • 7 days Iranian Oil Tanker Sinks After Second Explosion
  • 9 days Russia To Discuss Possible Exit From OPEC Deal
  • 9 days Iranian Oil Tanker Drifts Into Japanese Waters As Fires Rage On
Alt Text

Grading 2017 Oil Price Predictions

Oil and gas had a…

Alt Text

Iranian Protests Will Not Impact Oil Prices

Iran’s oil industry has remained…

Alt Text

Can The Oil Price Rally Continue?

Oil markets took a breather…

Daniel J. Graeber

Daniel J. Graeber

Daniel Graeber is a writer and political analyst based in Michigan. His work on matters related to the geopolitical aspects of the global energy sector,…

More Info

Economy, not Physical Markets, Driving Oil Prices

Economy, not Physical Markets, Driving Oil Prices

The U.S. Department of Energy last week issued one crude oil loan from the Strategic Petroleum reserve to Marathon Petroleum Co. as gulf operators dealt with the effects of Hurricane Isaac. The dual effect of the Category 1 storm and the Labor Day holiday in the United States caused a brief spike in energy prices. More than 80 percent of the production platforms in the Gulf of Mexico closed as a result of the storm, causing a ripple effect in the market for petroleum products. Western economies had already expressed concern about the economic fallout from high energy prices. A recent statement from the G7, however, and continued growth in the Chinese economy may suggest there are broader geopolitical concerns at stake than physical market issues.

The U.S. Treasury Department issued a statement on behalf of the G7 noting the "substantial" economic risks of increasing oil prices. G7 members called on oil-producing economies to add more crude to markets to meet rising demand.

"The current rise in oil prices reflects geopolitical concerns and certain supply disruptions," the statement read.

The Treasury Department said G7 members were ready to call the International Energy Agency to action to ensure markets were flowing. IEA Executive Director Maria van der Hoeven, however, said that energy markets were "well-supplied." Hurricane Katrina in 2005, a much stronger storm, prompted a strategic petroleum release, but by Friday, companies like Exxon Mobil had already started the process of restoring operations in the Gulf of Mexico as the remnants of Isaac moved inland.

The U.S. Bureau of Safety and Environmental Enforcement said nearly all of the oil production in the Gulf of Mexico was shut in by Isaac. The temporary restriction represented 95 percent of the daily production from the region. In mid-August, however, the IEA had already lowered its demand forecast from 900,000 barrels per day this year to 800,000 bpd in 2013 because of sluggish economic growth, suggesting markets could withstand the closure in the gulf.

Outside the G7, the Chinese economy is expecting a slowdown in its own right. China's economy was expected to grow 0.1 percent to 8.1 percent in 2013, down from previous predictions of 0.5 percent growth.  Analysts had said a bearish Chinese economy was "not good news" for the international energy market. For the last 20 years, the Chinese economy has been the driving force behind much of the energy markets. At least some of that slowdown in China, however, was because of a weak Western economies.  The French economy again moved toward recession and the IEA put U.S. economic growth at 2 percent for next year, a 0.3 percent decline from the previous report.

Predictions of a release from the SPR brought a frenzy of reports criticizing the heightened reaction to rising energy prices. The IEA had said markets are not only well-supplied, but the agency's assessments of long-term economic growth suggest recent increases in oil prices may be temporary. The G7 statement may have been a political move that reflected the economic outlook for member states, however. Crude prices fell briefly in reaction to the G7 statement, but rallied again after U.S. Federal Reserve Chairman Ben Bernanke said injecting more money into the economy could fuel growth. The all-options-on-the-table approach by the G7, coupled with market reactions to Bernanke's speech, suggest that, at this point, there are few physical market mechanisms at play in recent trends for oil.

By. Dan Graeber of Oilprice.com




Back to homepage


Leave a comment
  • Harold Bell on September 04 2012 said:
    Oil prices will rise until it hits $150 barrel and when that happens the big rig " BP Oil" on gulf island, "Alaska" will complete its 40,000 depth drilling into the world's largest known oil reserve. This is a really large rig, of which; is three time bigger than any known current rig. And like the drilling in in the Gulf of Mexico they are drilling into a high pressure reserve with unique equipment and a unknown result. Therefore; one should also consider there are other factors built into the price of oil such as the manipulation of supply markets by the big players. Why? There is an increased investment and equipment cost and a increase in the price will cover the increase in extraction cost. Remember, this also includes legal cost, and that in itself could be a big factor.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News