Despite Middle East Tension, Global Growth Worries Drive Oil Prices
(eToro Blog) Oil prices could be set to post their fourth consecutive weekly loss despite increasing tensions in the Middle East which could disrupt supplies; analysts say that if realized, that would be the longest losing streak in more than two years. On the whole, it would appear that investor worries over a slowdown in the global economies are having a greater impact on prices than supply concerns. Oil analysts believe that the situation in Iran will likely result in a premium being priced in, much as the recent steep drop was seen as the outcome of markets pricing in a Greek exit.
Over the past several months, the west has dismissed Iran’s steadfast assertion that they are entitled to promote their program of nuclear fuel enrichment and has meted out sanctions against the country which has helped to support oil prices. But recently, one U.S. politician publicly stated that those sanctions could have such a detrimental effect on prices that it would be justification enough to release global emergency reserves.
As of this writing, NYMEX-traded oil is higher at $91.12 per barrel and oil traders’ sentiment on OpenBook is primarily bullish with buyers outnumbering sellers by a 3 to 2 ratio. According to eToro’s Senior Analyst Lior Alkalay, even if near term oil prices should drop below $90 per barrel that is unlikely to continue over the long term as the supply side remains a challenge.
Making a rare venture into oil, OpenBook trader krisssss67 closed a long position earlier with a 9.09% gain which followed a smaller gain earlier. The trader is only now beginning to turn a profit in oil trades which has been only sporadically traded, with the trader having far greater success with gold. For the entire portfolio; the trader has a posted 261.3% profit for the month.
Openbook trader ciberdyn from Colombia, who is fairly new to OpenBook, has afforded a far greater allocation to oil, giving it 87.8% of the portfolio, which has yielded a 0.5% gain. One short position opened earlier is currently nearing the break-even point. A 10.4% allocation in gold, meanwhile, has returned 9.4%.
On the demand side of the oil equation, data from the U.S., Eurozone and China suggest that global growth is slipping to the extent that demand could take a serious slide. Most worrying of all the data is the decline in factory output and export orders in China, which is the second largest oil consumer in the world after the U.S. To a lesser extent, in the U.S., the largest oil consumer, manufactured goods demand fell short of expectations last month, adding to existing worries that the U.S. economy is backtracking on its recovery.
Copyright 2012 eToro BlogNote: Past performance is not an indication of future results. This post is not investment advice. CFD trading bears risk to your capital.