Oil Up on Expected Stockpiles Decline, Economic Pessimism
The price for Brent blend of oil reached its highest level since May today on downward expectations regarding the US commercial inventories and with no end seen to the US troubles with Iran. Even pessimistic speech delivered by Federal Reserve‘s chairman, Ben Bernanke, today could not push the oil to the red zone.
It is the fifth straight bullish day for crude. The current price growth wave has started on July 11 following a report by the US Department of Energy, which had shown a decrease of about 4.7 million barrels in the commercial oil stockpiles. Tomorrow’s weekly report is expected to show a decline by 0.8 million barrels.
The US administration sees apparent diplomatic solutions to the Iranian nuclear program crisis. Meanwhile Iran is threatening to ban navigation in the Strait of Hormuz, effectively cutting out the way for about 20% of world’s shipments of crude. A statement made yesterday in Jerusalem by the US Secretary of State Hillary Clinton summarizes the current situation with Iran:
We will use all elements of American power to prevent Iran from obtaining a nuclear weapon.
Although the Fed is naming the jobs growth in the United States one of its main objectives, Ben Bernanke is expecting the process of recovery from the current unemployment rate to be very slow. Additionally, he named the European financial crisis as a risk source number one for the presented outlook in its semiannual monetary policy report to the Congress today:
However, tensions in
euro-areafinancial markets intensified again more recently, reflecting political uncertainties in Greece and news of losses at Spanish banks, which in turn raised questions about Spain’s fiscal position and the resilience of the euro-areabanking system more broadly.
Despite the given negative factor, the oil traders and investors reacted mostly to the bullish news for this commodity. It rose from $103.38 to $104.25 as of 17:54 GMT today. The highest daily price was reached earlier today at $104.75 — the record maximum level since May 30.
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