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Are Oil Markets Becoming Immune To Geopolitical Risk?

Are Oil Markets Becoming Immune To Geopolitical Risk?

The geopolitical risk premium in…

James Burgess

James Burgess

James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also…

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Oil Prices Fall to 8 Month Low as Spanish Bailout Fails to Ease EU Debt Crisis

Oil Prices Fall to 8 Month Low as Spanish Bailout Fails to Ease EU Debt Crisis

Following in the footsteps of Greece, Portugal, and Ireland, Spain has now become the fourth nation to approach the European Union and request a bailout, since the debt crisis began nearly three years ago.

Europe’s debt crisis is slowing economic growth in the region and reducing fuel use. Oil prices are being influenced by the situation in Europe as traders and analysts try to predict the future economic health of the region, and therefore the demand for oil products. Initial hope that the €100 billion ($126 billion) bailout would succeed in alleviating economic pressure was brief, but in the end oil actually fell to an eight month low in New York.

Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, explained the reason for the scepticism over the success of the bailout. “Every rescue package has less impact than the previous one. We need to see a solution. Either the euro has to be dissolved or we need to see Europe unify on a fiscal and economic basis.”

Due to speculation and fear that Europe’s debt crisis will grow and eventually derail the economic recovery, slashing demand for fuel in the region, Brent oil, a benchmark for nearly half the world’s crude, has fallen by 22 percent since the 13th of March, and 16 precent since the beginning of the year.

Crude oil for July delivery fell $1.40 to $82.70 a barrel on the New York Mercantile Exchange, the lowest settlement since the 6th of October. Brent oil for July settlement dropped $1.47, or 1.5 percent, to end the session at $98 a barrel on the London-based ICE Futures Europe exchange, the lowest since the 27th of January 2011.

By. James Burgess of Oilprice.com



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