Oil Prices Expected to Rise as Iran Sanctions Begin
Oil prices have just seen the worst quarter in 5 years, however things are expected to turn around as the European Union boycott on Iranian oil is about to begin.
China is Iran’s biggest purchaser of crude oil but is now considering slowing down purchases. This is punishment for the regime’s covert nuclear weapons program. The European Union is Iran’s 2nd largest buyer, but this will all stop on July 1st.
This shows that the world is running out of patience with Iran, and will also accept higher oil prices if it stops Iran.
There is still a debate within OPEC over oil prices, with Saudi Arabia, Kuwait, Qatar, and the United Arab Emirates wanting to keep output high and prices low, while Iraq, Angola, and Venezuela want output low and prices high. Countries who’s regimes are almost solely supported by their oil revenues want the price to rise to make as much money as they can as fast as they can, while the countries who want higher supply (and therefore lower price) are focusing on long-term global economic growth and not the survivability of their own regimes.
OPEC supplies 40% of the world’s oil.
Oil prices fell to an 8-month low today as US unemployment rose to the highest level in 2012. This signals a continuing slow economic recovery in the US, and affects manufacturing – the biggest consumers of oil. The price of oil dropped over 3% today as a result.
Crude oil August futures fell $2.52 to $77.69 per barrel — the lowest level since October 2011 and down 25% this quarter.
Brent oil August futures fell $2.14 to $91.36 — down 26% since March.
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