Crude Oil Hovers at 10-Month High
After a disappointing sell-off in April, crude oil has finally
regained some positive momentum, although not necessarily for the
most positive reasons. The fossil fuel is currently sitting at a
10-month high, as it finally broke through the triple-digit barrier
for the first time since September 2012. While the riots in Egypt
have certainly played a role in the rapid rise in the price of
crude, the US supply levels are also playing a key role behind the
Crude Oil on the Rise
The most obvious reason for crude making such a sharp jump -- more than 6.5% in just a week -- has been the riots in Egypt. Civil unrest has struck the nation and many fear what would happen should riots spread into the Middle East. As the days go on, the conflict only seems to get worse, as the Egyptian military saw its threatening ultimatum to President Mohamed Morsy come and go, only to have the military then take over the state TV.
Though Egypt itself is not among the top producers in the world, it still accounts for a fair amount of oil, and its neighbors account for even more. If protests and riots spread to other nations, the supply of crude could feel a major pinch, especially with the way US supplies are beginning to shape up.
In the past few weeks, the US has watched oil supplies come under pressure as strong output continues. British Petroleum ( BP ) just recently announced that its Whiting refinery is back online and operational after undergoing a five-year restoration process, which will draw even further on supplies. Last week's EIA crude oil inventories figures showed a 10.3 million barrel drop in supplies when analysts had only expected that figure to fall by three million barrels.
Where Crude Goes From Here
While prices are enjoying a temporary spike, they will most likely cool off as soon as the conflict in Egypt does the same. As far as the supply issue is concerned, there are two ways that scenario can break down. The US is rapidly increasing its presence in the oil space and has been the beneficiary of some hefty finds over the past few years, giving it the capacity to increase supply.
At the same time, this surplus of oil may lead producers to begin exporting more oil, further dwindling domestic supplies, which would keep WTI prices higher. Pay close attention to the troubles overseas as well as the trends in the ever-shifting oil space in the US to make sure you stay one step ahead of the curve for this fossil fuel.
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Editor's note: This article by Jared Cummans was originally published on Commodity HQ .