Fluctuating oil prices fuelling global markets volatility

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A worker standing on one of the offshore Iranian oil rigs in Persian Gulf. Photo - Fars News Agency

Oil prices climbed once again Thursday as talk of Iran invasion gathered pace in the Gulf coupled with better-than-expected stock in the US and stronger economic data emerging from Germany despite Wednesday’s bond auction disaster.

London’s Brent crude oil futures reached $107.73 a barrel, up 71 cents from Wednesday market close. US crude recorded a 40 cent increase and closed at $96.57 a barrel before the Thanksgiving holiday.

According to US Energy Information Administration, crude stockpiles in the country fell unexpectedly week-on-week by 6.2 million barrels due to refinery rate rise and drop in crude oil imports.

“Oil is benefiting from the EIA inventory report which showed a surprisingly sharp draw inUS crudeoil stocks, which have fallen below the five-year average for the first time this year,” Carsten Fritsch, an analyst at Commerzbank in Frankfurt, told Reuters.

Michael Poulsen, oil analyst at Global Risk Management, agreed with Fritsch’s remark and added:”As we head into winter with the lowest stocks in several years on crude and heating oil/distillates this is keeping a floor under the prices.”

Poor German bond auction escalated fears the eurozone sovereign debt crisis is beginning to batter Europe’s biggest economy and undermine its economic growth. German Chancellor Angela Merkel has come under renewed pressure to let the European Central Bank intervene and tackle Berlin’s fiscal woes.

IRAN WAR MONGERING

Tightening of economic sanctions on Iran and talk of an Israeli-inspired invasion is having a negative impact on global oil prices as well. Reports say EU countries are engaged in discussions to impose more sanctions on the Middle Eastern nation in order to disrupt its nuclear programme which has been peaceful so far.

France said it is pushing for a ban on imports of Iranian oil while Israeli Prime Minister Benjamin Netanyahu called for further rigorous sanctions on Tehran. The call comes days after the US, Britain and Canada announced fresh round of sanctions aimed at derailing Iran’s economy and economic austerity measures.

Many analysts are of view that political turmoil in Syria and Yemen are also pushing upward the price of the vital economic resource.

At least five people lost their lives in Yemeni capital Sanaa when plain-clothes gunmen, suspected to be government supporters, opened fire on protestors camped at a square a day after President Ali Abdullah Saleh signed a deal in Riyadhto hand over power to the vice president.

Meanwhile, troubles also flared in neighbouring Saudi Arabia where security forces came under fire in Eastern Province. At least two people lost their lives and five others sustained injuries in the clashes. Saudi authorities attributed the unrest to “foreign power”, an implied reference to Shia-dominated Iran. The oil-rich kingdom has taken a hardline approach against the Islamic Republic in the past and has implicitly called for regime change in Tehran.

Oil markets react sharply to events in the Middle East which controls bulk of the global oil reserves and dominates production and distribution.

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