Oil Improves as US Consumer demand Improves

August 30^th, 2011: Oil prices rose to $87 a barrel in Asia as oil demands in the US improved. Benchmark oil for October delivery witnessed a hike by 22 cents reaching to $87.49 in the electronic trading of the New York Mercantile Exchange. Crude oil settled at a considerable high of $87.27 on Monday 29^th August.

Brent Crude in London for October delivery was also high at $112.30 on the ICE Futures exchange. Three weeks back crude was at $76, 16 percent lower than what it is today. This low price was owing to a widespread apprehension that the EU and the US economies might slip into a period of recession.

He month of July according to Commerce Department, witnessed a sharp rise in consumer spending which accounts to nearly 70% of the economic activity of a nation and this is perhaps the biggest in the last 5 months. Global stock markets too saw increase in spending. For instance the Dow Jones industrial average rose by 2.2 percent, and there were overall gains in most of the Asian stock markets.

With growing economic demands for oil crude oil is expected to head for a low, as apprehended by a few analysts. In Nymex trading, heating oil rose to 0.8 cents and reached to $3.03 a gallon, while gasoline gained 0.6 cents a gallon.

Also in conclusion to the final draft of a major deal between oil giants, most of the big energy companies of the world will have to surrender gas from Iraq’s southern oil fields, to a project led by Shell.

Overall a better week after about three weeks that were full of speculations and worries, with floods in the US and political instability prevailing in Iraq, oil prices last week were dismal, but a sunny morning seems not far.

Oil Enters a new Phase with the Libyan crisis heating up

On August 25, 2011: U.S supply report gave mixed signs about the demand for crude oil after this report oil prices hovered above $85 a barrel in Asian market. There is an extreme fluctuation in oil prices over the last few months.

US economy slowed sharply in the first three months of the year as high gas prices cut into consumers spending. Inventories of gasoline jumped 6.4 million barrels last week and distillates rose 2.0 million barrels. Prices have fallen from near $115 in May. BNP Paribas said in his report that the market has gone through a shift with the emergence of talk of double dip recession.

A major reason for the slump in oil prices is the economic austerity measures adopted by European countries. Oil has fallen recently along with stocks because of concern about the global economy. France gets 2.5% of its global production from Libya, is seen as a particular threat due to France leading role in international community to the rebel cause.

World economic growth has been revised down to 3.7%  in 2011 to 4.0% in 2012.this was mainly due to revision in the US forecast, which was cut to 1.8% from 2.5% in 2011 and 2.3% from 2.9% in 2012.

Product market sentiment showed a moderate recovery last month, with product cracks moving upwards across the globe supported by stronger Latin American import requirement. Gasoline demand has been weaker then expected in the Atlantic basin. Economies’ worries have affected the oil demand in the US; the aggregate oil demand will see a further decline this year.

Markets continue to monitor developments in Libya in order to asses how quickly oil production in the country would return to pre-war levels.