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Uncertainty Over Oil Prices Affects Markets

After a 3 day increase in oil futures, a stronger US Dollar meant that oil for December fell 60 cents to end at $94.20 a barrel on the New York Mercantile Exchange. Heavier losses were experienced on the ICE Futures Exchange with December Brent Crude closing at $103.46 a barrel – the lowest for almost half a year.

Apparent progress in talks between Iran and the West have contributed to a drop in oil prices. Despite French scepticism and Israeli pressure, there is growing optimism that an agreement will be reached over Iran’s nuclear program, resulting in an easing of economic sanctions. An increase in Iranian oil exports would be bearish for both Brent and US prices. There are some anxieties that there could be a flood on the markets but many analysts doubt if sanctions will be lifted this year. At the moment Iran is restricted to the export of 1,000,000 barrels a day. Continuing instability in Libya and Syria had previously increased Brent Crude prices. Reuters had reported a decrease in Libyan exports to only 10% of total capacity. Even a partial return to normality could further lower prices. Additional factors include a recent increase in North Sea oil supply of 6.3% to 30.6 million barrels in December.

Binary options trading investors currently trading oil futures will also be paying close attention to OPEC’s long term forecasts issued last week. OPEC said it expects its nominal OPEC Reference Basket price (ORB) to average $110 a barrel over the period to 2020 and then rise to $160 by 2035. It also forecast demand to rise to 108.5 million barrels per day by 2035. Fluctuations in oil prices due to current uncertainties offer investment opportunities for anybody watching the markets closely. The American Petroleum Institute and U.S. Energy Information Administration are releasing their numbers this week. Estimates are that crude oil barrels will increase by 3.5 million. The increase in supply is credited for the current price being less than $100 per barrel.

In addition to high American oil inventories, a possible reduction of the Federal stimulus program is also contributing to worries about oil prices. It is worth bearing in mind that seasonal demand (winter heating) contributes to high inventory figures and can be expected to reduce over the next few months.

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