Despite an emerging global consensus that oil prices are dangerously high, there seems little chance of the cost of oil falling significantly in the near US spending gets 0.4% March boost ...
US sees retail sales climb 0.2% ... future.
Analysts say measures agreed at Sunday's crisis summit in Jeddah are unlikely to have a dramatic impact on market trends.
But what is keeping prices close to record levels of almost $140 a barrel?
WEAK US DOLLAR
- The sharp jump in prices since 2005 has coincided with the plunge in the value of the dollar against other leading currencies
- Dollar weakness encourages financial investors to look for other more lucrative investment opportunities, with oil top of their list
- As oil is traded in dollars, it also makes it cheaper to buy
- Signs the US economy may be on the brink of recession have undermined the dollar, boosting prices. Prices rose $11 on a single day last month when the unemployment rate rose
SUPPLY CONCERNS
- Analysts say growth in global supplies is worryingly failing to keep pace with growth in demand
- Supplies from countries such as Russia are thought to have peaked and finding new sources of oil is difficult and expensive
- Increasing reliance on members of the Middle-East dominated oil producers group Opec, many of which are already pumping as much oil as they can
- Saudi Arabia is one of few countries with spare capacity but it has been reluctant to boost output substantially
DEMAND GROWTH
- Global thirst for oil is intense. Demand has risen by about 3 million barrels a day since 2005 and is expected to rise by 32 million barrels a day in the next two decades
- The US remains the world's largest oil consumer and high individual fuel usage continues to put pressure on crude stockpiles
- Fast-growing China and India are forecast to account for 40% of the growth in oil demand by 2030, as industry grows and demand for travel increases
POLITICAL INSTABILITY
- Much of the world's oil is concentrated in volatile regions, leading to fears of frequent and unpredictable disruptions to supplies
- Despite oil output being at a six-year high, Iraq is still beset by violence while militant groups in Nigeria's main oil-producing region have recently impeded about a quarter of its output
- Tensions over Iran's nuclear programme. There are fears that an Israeli attack on Iran's nuclear installations could trigger a wider conflict and threaten traffic through the strategically vital Strait of Hormuz, used to ship 40% of the world's oil.
MARKET SPECULATION
- Oil exporters say the price surge cannot be explained by the fundamental ratio of supply to demand and point their fingers at market speculators
- It is claimed that some traders are making huge amounts of money betting on the direction of prices, in turn forcing prices higher
- Others maintain that traders are simply hedging their investments against future market developments to reduce risk
- US regulators are looking for evidence of market manipulation while the IMF is examining the role of traders in the price spike
(BBC)
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