-->

2 Reasons For The Surge in Oil Prices

By 

Oil prices have been on a tear in the past few weeks. What are the reasons supporting the price rally and will it keep going on? How can it affect the global economy?
For the past three weeks, crude oil prices have been climbing steadily, reaching the $106 per barrel mark. This has caused market watchers to speculate that US gas prices may eventually
breach the $4 per gallon level, translating to higher fuel expenses in the coming months.
One reason for the recent jump in oil prices is projection of higher demand. The Law of Supply and Demand postulates that an increase in demand is generally accompanied by an increase in price for the asset.
A few days ago, the International Energy Agency released its global energy estimates. The group expects daily oil demand to rise by 1.2 million barrels next year, higher than the previous forecast of just 930,000 barrels.
Fortunately, non-OPEC oil-producing nations are up to the challenge, as they plan to increase oil production by 1.3 million barrels each day.
Another reason for the rally in crude oil is the recent drop in supply. This is also covered by the Law of Supply and Demand in saying that a decrease in supply is typically followed by an increase in asset price.
Last week, the United States Energy Department revealed that crude oil stockpiles fell by 9.87 million barrels. This was mostly a result of oil refinery outages in the country and in Canada.
In addition, Iraq decided to take a break on its oil exports to Turkey because of a geographical fault. Repair teams are already trying to fix the damage but each day of a the export standstill means a loss of 1.65 million barrels of oil.
Moving forward, oil supply could still be weighed down by the ongoing political conflict in Egypt. This has already put a constraint on the country's oil production and continues to pose a threat to the Middle East region's oil production, as the turmoil could spread to neighboring nations.
As a result, the mix of low supply and high demand is putting an upward pressure on oil prices all over the world. Other than resulting to increased gas prices in most nations, it could also make production costs more expensive as most manufacturing companies rely on oil as its main fuel source. Further increases could weigh on consumer spending, business investment, and overall growth.
For more information on how oil prices and commodities affect forex price action, visit http://PremiumSignals.com and learn all about intermarket analysis!