Current Oil Prices Move Closer to $109 with Middle Eastern Tensions

The current oil price moved closer to $109 per barrel as tensions between Palestinians and Israelis stirred up supply concerns, but sufficient inventories and worries about the global economy’s condition minimized increases.

Investors were worried that producers in the Middle East may be drawn to whatever potential conflict occurs between Israel and Palestine, which can affect their supply lines.

They did not give immediate notice to a request from the representative of Iraq to the Arab League for Middle Eastern states to utilize crude as a way to exert pressure on the U.S. and Israel over the strike on Gaza.

The crude price per barrel of Brent has stayed over $100 for the majority of this year due to fears of Middle Eastern disruptions as a low demand forecast restricts more gains.

Brent crude prices rose 70 cents to $108.71 while the U.S. benchmark moved 89 cents higher to $86.34 per barrel.

More than enough oil supplies have prevented the crude prices per barrel from rising on the tensions between Palestinians and Israelis over Gaza, said analysts.

According to analyst Samuel Ciszuk of KBC Energy Economics, there is no present threat to the supply of oil from the tension in Gaza. If protests in Egypt are observed to be rising, exerting pressure on the government to make a radical move and/or protests extending through the region, then it can be said that supply risks are increasing.

The weakening global economy keeps on pressuring commodity and financial markets. The shares of Europe dropped for the third day Friday as weak projection and uncertainty regarding the budget talks of the United States affected investors.

All these events lead to decreasing global oil demand growth and, if not for the rising geopolitical tension in the Middle East, the current oil prices may possibly be in an even steeper falling trend, according to Dominick Chirichella of the Energy Management Institute of New York.

Oil’s bottom line situation is that there is just a demand shortage compared to the rising supply.

By: Chris Termeer