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Why the sudden spike, fall in oil prices?

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Why the sudden spike, fall in oil prices?
Brainerd MN 506 James St. / PO Box 974 56401

After a few months of declining prices at the pump, are those days soon to be a distant memory?

Crude oil prices have been on the rise in the first few days of July. “After slumping some 25 percent from their February high of $109, oil prices are now on their way back,” a Wall Street Daily report said. “Oil prices jumped more than 4 percent yesterday (July 3) to $87 a barrel as tensions with Iran escalated,” said the Wall Street Daily. “And if yesterday’s failed talks (with Iran) are any indication, they’ll go even higher from here. All of this was based on speculation that Iran could hatch a plan to use oil tankers to block the Trait of Hormuz.

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Iran has previously threatened to block the waterway, through which more than a third of the world’s sea-borne oil trade passes, in response to increasingly harsh sanctions by the United States and its allies aimed at forcing it to curb its nuclear research program, Reuters reported.

Tuesday’s 4 percent jump added to a 9 percent gain from last Friday,” the Wall Street Daily reported.

Norwegian trade unions put off a decision to escalate a strike by offshore oil and gas workers until Friday (today), extending their battle with employers to nearly two weeks, Reuters stated.

However, the upward price trend may be short-lived. “Technical charts point to a downward movement for oil prices in the third quarter of the year, with Brent to drop to $71.37 per barrel for that period, Reuters analyst Wang Tao predicted.”

So what is really going on? Crude oil inventories fell by 3 million barrels during the week of June 29, just before the Fourth of July. However that’s above the 1.9 million barrel drawdown forecast by oil watchers. (U.S. Gulf Coast oil stocks are down 4.3 million barrels, primarily due to the administration’s standing against drilling in the Gulf following the BP oil spill.)

Look for prices at local pumps (Brainerd and Baxter area pump prices have hit a low of $3.39 for regular unleaded) to remain stable and fall as the recent blip in crude oil adjusts to world political and economic conditions.

Keith Hansen

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Denton (Denny) Newman Jr.
I've worked at the Brainerd Dispatch with various duties since Dec. 7, 1983. Starting off as an Ad Designer and currently Director of Audience Development. The Dispatch has been an interesting and challenging place to work. I'm fortunate to have made many friends, both co-workers and customers.
(218) 855-5889
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