Oil Prices Going Up

For John, BLUF:  War is not good for most of us.  Nothing to see here; just move along.

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The price of oil is fairly quick to react to events which might impact supply (or demand).&nbps; Here is a report from The Washington Post.

This summer’s run-up in crude-oil prices flies in the face of widespread optimism about oil supplies in the United States, where domestic production has surged as a result of shale drilling.  Yet global oil supplies remain somewhat tight in large part because of disruptions in Iraq and Libya.

In Iraq, persistent attacks on the pipeline from Kirkuk to Ceyhan sliced about 290,000 barrels a day off Iraqi exports, according to the Energy Information Administration.  In Libya, labor protests at several oil production facilities cut production to 1 million barrels a day in July, down from 1.5 million barrels a day in April.  It has now slumped to 200,000 barrels a day, according to a Bloomberg News report.  In Nigeria, crude exports were reduced during July and August because of work on key pipelines.

Further disruptions in Yemen, Sudan and South Sudan have trimmed global oil output.

But Greg Priddy, global oil director at the Eurasia Group consulting firm, expects that the run-up in oil prices may be temporary.  He expects a limited attack on Syria and notes that the summer peak oil consumption period is ending and that demand eases during the fall.  Moreover, he added in an e-mail, Saudi Arabia has increased its oil production to 9.8 million barrels a day in an effort to moderate prices.  The kingdom added 150,000 barrels a day to calm markets after the Egyptian military toppled the elected president Mohamed Morsi.

I have a friend who believes it is all manipulation by the Majors.♠  That is to say, the Majors play the price to maximize profits.  I tend to discount such conspiracy theories.  Besides, wouldn't this Department of Justice, in concert with this Department of Energy, go against such cartel like actions?

Regards  —  Cliff

♠  That is the major oil companies, like Exxon/Mobile.