Brent Strong Under Mounting Supply Concerns
Brent crude oil was strong Tuesday morning, trading near $111.23. Supply concerns sparked by last week's Israeli and Palestine conflict, and reignited by violent protests in Egypt, are supporting prices as the region remains unstable.
CNBC reported that Egyptian President Mohamed Mursi caused an uprising in his country when he declared that no legal challenges could be made to any of his decisions until a new parliament was elected. The decree gave Mursi what many are considering the power of a modern-day pharaoh.
Opponents of Mursi have taken to the streets in protest of his new power. The demonstrations, which have turned violent and already injured more than 500 people , are expected to continue throughout Tuesday.
This coupled with news that oil exports in Nigeria are expected to drop from 2.12 million barrels per day to just 1.98 million in January has supported concern that oil supply will be reduced in the new year.
Adding to Brent's price support is the decision by EU finance officials and IMF Director Christine Lagarde to release Greece's next aid installment. The decision, accompanied by a plan to reduce the country's debt and get it back to a sustainable debt to GDP ratio has strengthened confidence in the Eurozone and injected a bit of positivity into the market.
Gains from a decision about Greece were mitigated by concern about the US ‘fiscal cliff' which is rapidly approaching. While the government has assured the public that it is working to find a solution, Republicans in Congress requested details of President Obama's planned spending cuts, while fiercely opposing an income tax rate increase for the wealthy. A stalemate between Democrats and Republicans could mean the bundle of 600 billion dollars worth of spending cuts and tax increases will kick in on January 1st and tip the country into recession.
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