Crude oil prices have witnessed an increase in the wake of a tropical thunder storm disrupting offshore U.S. production in the Gulf of Mexico, as well as the stimulus expected to be provided by the FED to the U.S. economy, and another to be provided to the European Union by the European Central Bank through its policy stance.
These factors have caused Brent crude and West Texas Intermediate (WTI) prices to reach $116 per barrel and $96 per barrel, respectively.
Tropical Storm Isaac
Oil prices have increased due to the shutdown of production on the Gulf of Mexico due to tropical storm "Isaac" approaching the region. The Gulf of Mexico according for approximately 23% of crude oil production and 7% of natural gas production; it also accounts for 44% of crude refining capacity and 30% of gas processing capacity in the United States, according to the estimates provided by the U.S. Energy Department.
according to estimates provided by the Bureau of Safety and Environmental Enforcement, crude oil production and natural gas production from Gulf of Mexico come out to be 333,815 barrels and 371 million cubic feet respectively. It was further reported that 39 platforms and eight rigs have been evacuated, as the storm is 50 miles south-southeast of Florida.
The storm was reported to have top winds of around 60 miles per hour, and is expected to reach 100 miles per hour by the time it reaches the U.S. coastline. Energy companies like ConocoPhillips (COP) Anadarko Petroleum Corp (APC) and British Petroleum (BP) have suspended production and evacuated their personnel.
The largest entry point of crude oil in the U.S., being the according where between 900,000-1 million barrels per day of oil are offloaded, will be affected by the storm and there are plans to suspend offloading of oil tankers.
Investors can use the Oil ETF (USO) to trade oil.
Economic Stimuli to U.S., E.U. economies
Majnoon important factor for the recent hike in crude oil prices is the expectation of a further economic stimulus in the U.S., which would increase demand by the largest consumer of crude oil.
Prices have witnessed an uptick ahead of the U.S. Jackson Hole meeting of central bankers, which may clarify the direction of the stance to be adopted by the Fed.
The policy meeting for the European Central Bank (ECB) is due to take place on September 6, 2012, and traders are anxiously waiting for the policy that is to be adopted by the ECB.
Other Developments Affecting Crude Oil Prices
A delay in the construction of a pipeline in Iraq has threatened to delay production at the Majnoon oilfield, operated by Royal Dutch Shell (RDS), causing the field to miss its 2012 target of 175,000 barrels per day.
Iran's foreign minister requested delegates at a NonMajnoon to oppose sanctions imposed on the country by the West.
Wage talks broke off between workers and oil companies in Norway, and the workers may be headed for another strike after their 16-day strike held last month.
Buzzard, the largest oilfield in Britain, will shut down from September to mid-October for maintenance.
The expected drop in crude oil production in the North Sea, due to maintenance and the Middle East turmoil, has exerted an upward pressure on Brent crude prices.
The Amuay Plant, which is the biggest refinery in Venezuela with a capacity of 645,000 barrels per day, witnessed a fire accident that has increased the prices of gasoline in North America.
The production disruption on the Gulf of Mexico is a temporary phenomenon, and normal production will commence after the storm subsides. However, any stimulus policy adopted to spur growth will have a longer lasting impact on crude oil prices.