Brent Caught Between Supply and Demand Fears at $108
Tension in the Middle East continued to lend support to Brent prices on Friday as concerns about global demand in the future capped gains. The commodity traded at $108.32 on Friday morning, reflecting gains after fighting in the Gaza strip stoked investor fears of supply interruptions.
Reuters reported that many believe oil prices wedged between supply fears and demand concerns will be good for the global economy because it keeps prices stable.
An Israeli airstrike which killed a Hamas military chief on the Gaza Strip this week is expected to be only the beginning of a violent conflict between Israelis and Palestinians. Brent has been supported all year by the tension in the area, but after this violent airstrike, many investors are concerned that Arab producers will be pulled into the conflict.
Also on investors' minds is the nuclear development program in Iran. The country has continued to move forward with uranium enrichment against the wishes of the U.S. and Europe. After several threats of retaliation to military action, the heavily sanctioned country is furthering the program in an underground nuclear plant. This has led many to believe that there is no peaceful outcome for the standoff between Iran and the West.
As the US struggles to reach a decision before the looming ‘fiscal cliff', uncertainty surrounding the number one oil consumer has weighed heavily on Brent prices. That, coupled with Europe's debt crisis, is enough to drive prices to a new low. However, the geopolitical tension has balanced out losses due to struggling global economies.
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