This week’s was a roller coaster ride for oil prices.  The gap between WTI and Brent reduced. Along with that is President Obama’s statement to take strict action against oil price speculators. It is also time to take look at how much exactly is the debt crisis weighting upon the Brent. The media this week highlights the following issues:

  • · However just some days later, much awaited data was released sparking demand worries over pessimistic US data. Gene Ramos of Reuters report that crude oil held steady as supply worries eased over the Iran crisis. But latest data released by US showed that jobless benefit claims fell less then forecasted, existing house sales fell unexpectedly and the factory activity in the Mid-Atlantic region decreased.
  • · Lananh Nguyen of Bloomberg reports that market fundamentals in Brent are operating poorly and despite the better than expected debt auction of Spain, the crisis is far from over. The debt crisis has continued to weigh down on Brent prices and oil demand is not likely to increase anytime soon.
  • · US President Obama has called for strict action against oil price speculators. Obama made it clear that more police will be deployed and more funds will be devoted so that the price the consumers pay for oil is not due to speculators making quick money. Such statement was expected from the President by us for quite a time especially as it is election time and Obama is aiming to run as President for the second time.
  • · In reaction to Obama’s statement of taking strict action against oil speculators the NYMEX cut the margin requirements on a series of crude oil spreads. The analysts’ reaction to this is that cutting the margin requirements would only add to the problems as they just remove small traders and hence reduce liquidity which often piles up in the form of increased volatility.