Oil prices plummet amid high US Supplies and easing tensions in the Middle East

Published: 6 November, 2013 15:59

Price of oil and gold forecastLast month saw the price of crude go up to a little over £70 per barrel amid concerns over the possibility of war breaking out in Syria. However, easing tensions in the region, thanks to significant diplomatic strides being made on Syria’s chemical weapons and Iran’s nuclear program, along with high US supplies have led to the price of crude plummeting to slightly over £58 per barrel.

The declining geopolitical risk in the Middle East has played a significant role in the fall of the price of crude oil. The likelihood of Iranian oil flowing back into the market has increased significantly as the country’s leaders declared they want to come to an agreement quickly with the major powers regarding their nuclear program.

The U.N.’s adoption of a resolution designed to eliminate Syrian chemical weapons, along with the country’s cooperation in this matter has also led to somewhat stabilising the region.

The only real issue in the region right now is Libya, as their exports are still restricted and have fallen to approximately 90,000 barrels per day as of the end of October. Local officials cited strikes as the main reason for the drop in production, while other sources claimed it was due to problems with the supply of electricity.

Regardless of the Libyan situation, the situation in the Middle East is clearly stabilising, which signals that an increase in availability of crude is just around the corner. Furthermore, the drop in price of crude can also be attributed to the season as many refineries shut their operations down for autumn maintenance, which has also led a fall in the demand of crude.

However, if the Libyan problem exacerbates, there’s a good chance the price of crude will rise, especially considering that Libya’s supply outage has been acting as the main support line, stopping crude oil from plummeting further.

For anyone engaging in commodity trading online, the price of crude at the moment makes for a relatively good long position, especially considering that it was not forecasted to drop below £66, so there’s a good chance for a market correction.

Gold Price Continues to Fall

In terms of another favourite commodity, gold has lost approximately 3 per cent since the end of October amid concerns regarding the Federal Reserve’s decision to scale back stimulus. Investors aren’t yet sure whether the data will back the Fed’s claims of economic recovery.

If it does, expect gold prices to drop further. However, if economic reports reveal that the recovery isn’t as strong as the Fed has touted, there’s a good chance gold will finally shake off the losing streak it’s been on for the past six months.

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