A case for rising Crude Oil prices
The International Energy Agency (IEA) notes that there are 3 factors that cause significant shortages in Crude Oil production; technical problems, the weather and civil unrest.
An unless the Iran Oil embargo is the result a change in the Global political weather, there is another.
The EU ban on Iranian Crude Oil started Sunday, and Iran has gone so far as to admit that its economy already has been badly damaged.
The United States has tightened the noose on Iran more with sanctions set against foreign companies that do business with Iran.
In a strange way, Crude Oil importers have been very fortunate recently as Global Crude Oil prices have fallen because of slow demand from flagging World economies, and a decision by OPEC to keep supplies static, and unexpected surpluses of Crude Oil stockpiles in the US and other nations.
The Iran embargo looked to push Crude Oil prices toward the record prices set in Y 2008.
That prediction turned up wrong, and it represents a reason the economies of the US, China, Japan, United Kingdom and the EU are not in worse shape than they are.
If Brent traded above 120 bbl for several months, these very fragile national economies would have fallen into depression like periods at the hands of their politicians.
As the Iran situation has reaches a critical time, the IEA's list of 3 reasons for shortages have been put in the back seat. But, they should not be. If you are keenly observing, Nigeria and Venezuela are among the 10 largest countries by proven Crude Oil reserves, each has an shaky political situation.
Weather has been overlooked as too, but hurricane season is here again. The National Oceanic and Atmospheric Administration predicts as many as 15 storms in the 6-month season that began in June. Based on past experience, some of those could move far enough into the Gulf of Mexico to interrupt both drilling and refining.
A price increase in Crude Oil attributable to Iran, if there is one, will be fairly small, the factor that could alter that soon is more military tension between Israel and Iran over Iran's nuclear energy development programs, the same that brought on the ban.
The situation in Iran may not do much by itself to increase Crude Oil prices, but when the traditional disruption are added in there is a fundamental case for higher Crude Oil prices. 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.