The sharp fall in Crude Oil prices since mid-June continued Monday, as Global economic concerns and a geopolitical tug-of-war in the Middle East dominate the headlines with no reversal in sight as yet.
Sluggish economic prospects in the West, the uncertainty about the Chinese economy's way of landing and geopolitical tensions in the Middle East dictated the pace of Crude Oil prices in 1-H of Y 2012.
The price of the Black Gold (Crude Oil) in the UA fell Monday almost a 10 month low at 78.28 off 1.86% compared to the previous day. Since its Y 2012-peak end of February at roughly 110 bbl, Crude Oil has lost 29% in value and has, in the remaining 5 days in June, little chances to finish 1-H of Y 2012 on a positive note.
Ongoing concerns that Greece might be forced to leave the eurozone, even after pro-euro parties won the last parliamentary elections, and overall disappointing economic data from the United States and China weigh on the prices of Crude Oil.
US manufacturing grew at its slowest pace in 11 months, as research firm Markit reported on 21 June, while on the same day rating agency Moody's Investors Service downgraded 15 of the world's largest banks.
In addition, ongoing talks between the 5 permanent UN Security Council members plus Germany (P5+1) and Iran on its nuclear energy program eased tensions and reduced the war-fear premium in oil prices, despite the ongoing turmoil in Syria and the threat of a NATO intervention.
Meanwhile, media reports said that the United Arab Emirates ( UAE) started pumping Crude Oil through a new pipeline ranging from Abu Dhabi to the port of Fujairah in the South-East of the UAE, reducing the threat of an Iranian closure of the Straits of Hormuz in case the United States or Israel would attack Tehran's nuclear facilities.
In order to ease pressure on rallying Crude Oil prices in Q-1 of Y 2012, Saudi Arabia increased its production quota to 10-M BPD.
This has led to a permanent dissent among other OPEC member states which need higher fiscal break-even prices than Riyadh. Iran, Iraq, Venezuela and Algeria opposed an OPEC quota higher than 30-M BPD at the 161st OPEC meeting on 14 June in Vienna.
The countdown runs for an EU embargo against Iranian oil imports to step up pressure on Tehran's nuclear program. From 1 July forward, all EU states will stop importing crude from the Islamic republic.
Western powers suspect Iran of developing an atomic bomb under the cover of civil nuclear plans.
On 11 June, U.S. President Barack Obama issued sanction waivers for seven importing nations of Iranian Crude Oil as a reward for already significantly reducing imports, among them South Korea, India and Turkey. China, however, as the largest importer of Iran's Crude Oil was not granted a waiver.
There is more to go in the tug-of-war for Crude Oil. Stay tuned...
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.