Unrest in the Middle East is the reason for the current oil price spike, says EnergyQuote JHA analyst Andrew Hill.
Mr Hill told ELN: “The political unrest in Libya, and other countries such as Tunisia, Egypt and Bahrain, is undoubtedly the major cause of the current price spike. Fears that the political unrest will lead to supply interruptions are clearly weighing heavily on market sentiment.”
However, oil prices had been rising before unrest in the Middle East surfaced, he added: “Oil prices began climbing long before the first sign of unrest in Egypt. Currently, global oil stocks, by any measure, are at historically high levels, owing to recession induced stockpiling.”
Instead he believes the reason for high oil prices in the long-term is down to the oil-rich countries and speculators: “Oil prices above the levels reasonably justified by market fundamentals are counter-productive. The blame for these market fundamentals, contradicting oil prices, can be laid largely at the door of both oil producing nations and speculators.
“Producing nations know that excessively high and unjustified oil prices bring recessionary pressures to their consuming markets, which will ultimately choke fragile economic recovery and hence demand for oil. However, until this becomes too unpalatable a situation, no incentive exists to put more oil onto the market to reign prices back.”