Supply Concerns and European Plans Escalate Oil Prices

On Tuesday November 22, 2011, oil prices yet again rose, due to mounting concerns over the strife in Middle East and the resultant disrupting of supplies, along with hopes that the European crisis will not have a spillover effect on the world economy.

Benchmark West Texas Crude rose to reach $ 98.01 in New York. Brent Crude used as the key to price oil produces in other countries rose to $108.65 per barrel in London.

The rise in oil prices are a result of the concern that the latest sanctions imposed on Iran might reduce the outflow of oil from the otherwise largest oil producer in the world. Moreover Egypt witnessed large spurts of violent protests and stirred apprehensions that it might further disrupt supplies. Though Egypt is not a large oil produce, it definitely controls vital supplies of energy and has considerable influence in the region surrounding it.

The worst of all fears that wielded was as a response to the European debt crisis, and that any worsening of it might aggravate the financial gridlock in other parts of the world. The IMF however has announced that it has plans to spread the spilling over of the European debt crisis, and would thus provide easy cash to countries that are facing financial stress.

The European debt crisis might lead to worsened industrial activity in and around the region and thus push the recession outwards.

Meanwhile the US economy, as reported by the Commerce Department, is slowly recovering, with its growth rate being slower than what it was in the summers, resulting in a sluggish movement in the stock market as well.

Andrew Lipow, an oil analyst in Houston said, “The market is concerned on the one hand about the rate of economic growth, on the other hand issues in the Middle East are continuing.”