• 2 days Iraq Begins To Rebuild Largest Refinery
  • 2 days Canadian Producers Struggle To Find Transport Oil Cargo
  • 2 days Venezuela’s PDVSA Makes $539M Interest Payments On Bonds
  • 2 days China's CNPC Considers Taking Over South Pars Gas Field
  • 2 days BP To Invest $200 Million In Solar
  • 2 days Tesla Opens New Showroom In NYC
  • 2 days Petrobras CEO Hints At New Partner In Oil-Rich Campos Basin
  • 2 days Venezuela Sells Oil Refinery Stake To Cuba
  • 2 days Tesla Is “Headed For A Brick Wall”
  • 3 days Norwegian Pension Fund Set to Divest From Oil Sands and Coal Ventures
  • 3 days IEA: “2018 Might Not Be Quite So Happy For OPEC Producers”
  • 3 days Goldman Bullish On Oil Markets
  • 3 days OPEC Member Nigeria To Issue Africa’s First Sovereign Green Bond
  • 3 days Nigeria To Spend $1B Of Oil Money Fighting Boko Haram
  • 3 days Syria Aims To Begin Offshore Gas Exploration In 2019
  • 3 days Australian Watchdog Blocks BP Fuel Station Acquisition
  • 3 days Colombia Boosts Oil & Gas Investment
  • 4 days Environmentalists Rev Up Anti-Keystone XL Angst Amongst Landowners
  • 4 days Venezuelan Default Swap Bonds At 19.25 Cents On The Dollar
  • 4 days Aramco On The Hunt For IPO Global Coordinators
  • 4 days ADNOC Distribution Jumps 16% At Market Debut In UAE
  • 4 days India Feels the Pinch As Oil Prices Rise
  • 4 days Aramco Announces $40 Billion Investment Program
  • 4 days Top Insurer Axa To Exit Oil Sands
  • 5 days API Reports Huge Crude Draw
  • 5 days Venezuela “Can’t Even Write A Check For $21.5M Dollars.”
  • 5 days EIA Lowers 2018 Oil Demand Growth Estimates By 40,000 Bpd
  • 5 days Trump Set To Open Atlantic Coast To Oil, Gas Drilling
  • 5 days Norway’s Oil And Gas Investment To Drop For Fourth Consecutive Year
  • 5 days Saudis Plan To Hike Gasoline Prices By 80% In January
  • 5 days Exxon To Start Reporting On Climate Change Effect
  • 6 days US Geological Survey To Reevaluate Bakken Oil Reserves
  • 6 days Brazil Cuts Local Content Requirements to Attract Oil Investors
  • 6 days Forties Pipeline Could Remain Shuttered For Weeks
  • 6 days Desjardins Ends Energy Loan Moratorium
  • 6 days ADNOC Distribution IPO Valuation Could Be Lesson For Aramco
  • 6 days Russia May Turn To Cryptocurrencies For Oil Trade
  • 6 days Iraq-Iran Oil Swap Deal To Run For 1 Year
  • 9 days Venezuelan Crude Exports To U.S. Fall To 15-year Lows
  • 9 days Mexico Blames Brazil For Failing Auction

Breaking News:

Iraq Begins To Rebuild Largest Refinery

Alt Text

Oil Prices Rise On Solid Chinese Demand

Oil prices rose on Friday…

Alt Text

Saudis Raise Crude Oil Prices To Asia

Solid demand and a stronger…

Alt Text

The Man Behind The Oil Price Rally

While the extension of the…

Oil Prices Dive 5% on Speculation and Mystery

Oil Prices Dive 5% on Speculation and Mystery

As the Saudis move to pump more oil, the US sits on increased crude supplies, the market gets edgy over Eurozone economic instability, and FedEx cuts it profit outlook, the price of oil has fallen for three straight days to the lowest in over a month and an overlooked talk with Iran adds mystery to speculation.  

On Tuesday, oil futures closed at $95.29 a barrel in New York, down $1.33 from Monday, which had seen a sudden $3 per barrel drop in 60 seconds. On Wednesday, oil prices further slid in New York, to $92.26 a barrel for October light sweet crude deliveries.

All of these factors have driven the speculation leading to this week’s drop in oil prices, but to varying degrees. The FedEx news had only a short-lived effect on the oil prices, for instance, as did the European Central Bank’s announcement that it would implement more monetary easing measures, while announcements coming out of Saudi Arabia that the country intends to keep production high in order to suppress prices has a more lingering effect on the market.

At the heart of oil price drops on Tuesday was the Eurozone crisis, and particularly Spain’s debt woes. Prices plunged despite the fact that Spain sold off nearly $6 billion in short-term debt because its 10-year government bonds remained at an economically untenable level, with around 6% yield. At the same time, the euro dropped against the dollar, which typically leads to lower oil prices simply because oil is priced in dollars.

Another factor pushing oil prices down on Tuesday was the announcement by FedEx Corp that it would cut its forecasts for growth in 2013 on slimming profits. 

By Wednesday, Tuesday’s factors were no longer key drivers, giving way instead to speculation based on a combination of Saudi Arabia’s ready pump hand and reports that US inventories are swelling.

RELATED: Oil Companies Race Back to the Gulf of Mexico

Crude oil futures are down sharply at mid-day Wednesday on the New York Mercantile Exchange, on the heels of a report showing a big jump in U.S. inventories. On Wednesday morning, the US Energy Information Administration announced that crude inventories had increased by more than 8.5 million barrels last week. This increase went far beyond what analysts had earlier predicted.

Meanwhile, inventories look set to maintain supply as Saudi Arabia continues to produce more crude than it has in 30 years, with supplies predicted to exceed global demand by over 1.6 million barrels per day from OPEC countries.

There are countless other factors driving oil price fluctuations, attempting to predict the future of oil prices is a harrowing ordeal, and analysts get it wrong more often than not. Predictions are dependent on all the variables that drive speculators and their perceptions.

The perceived implications of rising Chinese-Japanese tensions over the disputed (oil-rich) Shenkaku islands, a wave of Arab-Spring like protests across the Middle East/North Africa, only this time with a decidedly anti-American flavor, a shaky stand-off with Iran and an Israeli elite that is becoming increasingly difficult to hold back—all of these things will drive oil prices on some level by influencing the perception of speculators. And they are very easily influenced.

This brings us back to the reasons behind Monday’s sudden $3 drop in crude oil prices, which is the most mysterious day of trading of the week. Someone dumped 23,000 crude and Brent contracts from CME’s West Texas Intermediate and Intercontinental Exchange (ICE) on the market very suddenly. No one seems to know who it was, but certainly Saudi Arabia was already at the pump, prepared in advance to announce an increase in output.

RELATED: Shell to Build the World's First Ever Floating LNG Plant

Less than 24 hours later, a very interesting meeting took place in the Iranian consulate in Istanbul between Iran’s foreign minister and Catherine Ashton, who is heading the 5+1 group talks over Iran’s nuclear program. In all likelihood, some deal has been cut with Iran, and it is to Iran that we should probably look for indications of future oil prices. If a deal is cut with Iran over its nuclear program, oil prices will plummet.

The big question here is why the Saudis are promising to maintain high levels of production at a time when supplies are already swelling? There are more than natural market forces at work here, and speculation is being manipulated.

Will oil prices continue to fall? For this, follow the geopolitics particularly where it concerns Iran, which is difficult when deals are cut in corridors that are closed to the public.

By. Jen Alic of Oilprice.com




Back to homepage


Leave a comment
  • Bob Berke on September 21 2012 said:
    Another great article. As to Saudi pumping up supplies, is it possible that with crude prices falling, that the Saudi's are keeping up pressure on Iran to come to the table, as sanction are beginning to bite?
  • Mayer Rothschild on September 22 2012 said:
    Merely a pre-Iran war set up to shake out some of the longs. Get ready for it next week.
    Day of Attonement. Jews get permission to go ahead and lie cheat, steal
    From any goy. It is all permissable with kol nidre.
    Once they have got the free pass- false flag and aar with Iran.

Leave a comment




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