Yesterday, crude oil contract for May delivery gained $0.79 while it recorded an all time high of $117.83 per barrel as a pipeline in southern Nigeria was damaged by militants as they are expecting to cut crude output by approximately 169,000 barrels per day causing supply woes in the market.
Nigeria is a major supplier to the US, so this adds to the summer driving worries as they fear insufficient supply already. The May contract closed yesterday at $117.48 another record closing, while set an intraday low of $115.65 per barrel.
Supply and demand still control the crude market as this is investors' main focus at the moment which is causing the surge in prices that we are witnessing lately. In addition to supply and demand worries, the weak greenback is also giving support to the rally of oil prices as investors usually enter the crude market as a hedge against inflation and a falling US dollar.
Foreign investors are attracted to the crude oil market as it is cheaper for them since they hold a stronger currency. Today June contract opened at $116.74 while recording a high of $116.80 per barrel and a low of $116.47 per barrel so far.
Crude oil prices will continue to spike as long as there are geopolitical tensions in the market which raises oil prices due to supply and demand factors. Another support to the incredible rise of prices will be the deteriorating greenback. So as long as the US stays in recession, it will constantly drag down the US dollar as the Feds keep trying to revive the economy by cutting interest rates. Consumers fear the rally of oil prices as this only adds to current inflationary pressure.