Market Overview

Brent Could Rise to $130 Over Tensions in the Middle East


Wednesday morning, Brent crude oil traded at 111.360, down nearly 0.4 percent from Tuesday's prices. As the world's major economies continue to struggle, demand forecasts paint a grim picture for investors.

Europe continued to be the main cause for concern, with Spain's economic problems as the focal point. On Tuesday, Spanish Prime Minister Mariano Rajoy quashed rumors of an imminent request for aid and denied reports that Madrid would ask for a bailout as early as this weekend. The bailout, seen in a positive light by the market, would surrender much of Spain's economic sovereignty to nations like Germany. On Tuesday, European unemployment data was released and gave investors more reason to doubt the eurozone's stability. Many worry that the extremely high percentages will only add to social unrest.

China has also caused concern for future crude oil demands. Manufacturing data from the country indicated that the economy was slowing down. Some have attributed this sluggish growth to a combination of the European debt crisis and US efforts to cut spending.

Despite worsening demand conditions, Financial Times reported Tuesday that analysts at Goldman Sachs believe oil has the potential to reach as high as $130 in the coming year. The tension between Israel and Iran has been supporting oil prices; but if it escalates we may see increased spikes in crude oil. As Iran furthers its nuclear program, a war or international embargo becomes more likely.

Both situations would add supply complications and cause a more volatile market with dramatically increasing prices.

Posted-In: Financial Times Goldman Sachs Mariano RajoyNews Commodities Forex Global Markets


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