The Math is very simple.
The political crisis around Iran will resolve itself within the next 5 months. The economic crisis won’t. 2 dollar gasoline per gallon is better than 3 dollar gasoline per gallon in an election year, but only where there is demand for all that oil. Alternatively a sitting president running for re-election will not wage a controversial third war to make a point when there are many “other subtler ways” of making the same point.
• Iran has agreed to renewed negotiations after the last talks failed a year ago. Reuters reports that the weakening demand factors might soon overshadow the supply worries from the Middle East. While US and Europe have been leading candidates at the faltering demand school China’s entrance into this list is what is worrying crude oil bulls. Is it just the turnaround season at refineries or is there more to these slowing numbers.
• Garry White and Emma Rowley of the Telegraph talk about the market dynamics which are expected to stay for quite a time and are not everyday bubbles. They also highlights that gain in Libyan production has been offset by political turmoil in other countries like Sudan, Syria and Yemen. They argue that overall, there is not enough oil readily available in the market to provide for a buffer stock in shocking times to supply and this is making investors edgy.
• In the third update, Ian Telly of DOWJONES Newswire discusses IMF’s projections about crude oil and the general economy. IMF actually projects 5% decline in oil prices for 2012. Even if the Iran issue would cause prices to hike in the coming months, this would affect already faltering global demand and cause it to decline which will again keep oil prices lower.