Beyond Libya: Four factors affecting oil prices
Oil prices changed little despite high trading volume on Friday, as oil traders eyed developments in four nations: Libya, Yemen, China, and Japan.
(Page 2 of 2)
Oil analysts believe most of the Libyan production has been made up by Saudi Arabia.Skip to next paragraph
Subscribe Today to the Monitor
Although much of the Saudi crude was geared more towards industrial uses, the Saudis have indicated they will blend whatever mix their customers want, says Mr. Kreil.
Although Yemen is not a significant producer of oil, news of violence in the country’s capital, Sana, was also roiling the oil markets.
“It’s another problematic nation in the region,” says Kilduff. “It borders Saudi Arabia and is important from a regional perspective.”
In another development watched by the oil markets, China’s central bank raised reserve requirements, in an effort to slow inflation. This will slow oil demand to only a minor degree, says Donald Straszheim, senior managing director at ISI Group, which does China research, in Santa Monica, Calif.
Mr. Straszheim estimates China currently imports about 5 million barrels of oil per day. China's strong economic growth in recent years has increased its demand for oil about 500,000 barrels of oil per day, each year.
“If the economy grows more slowly, which I think it will, that will lower annual demand growth to 400,000 barrels of oil a day, which in the broad scheme of things is just a rounding error,” he says.
Oil traders are also watching the events in Japan. If emergency crews cannot stop the release of radiation from the damaged reactors, it would lower demand for oil, says Flynn since it would delay reconstruction after the earthquake and tsunami. On the other hand, if the Japanese are finally able to gain control over their nuclear reactors, it would add pressure on the price of oil to rise, Flynn says.