Last week was full of ups and downs for the oil markets. First of all, Iranian and Venezuelan leaders have agreed to support an OPEC’s decision to cut production and after this statement oil prices slightly moved upwards in the beginning of this week. However, a few days later Saudi Arabia’ s oil minister Ali al-Naimi said that a further cut in production is not necessary for now. After this statements oil prices plunged to the lowest in more than 19 months; lower than $52. (Bloomberg)

Ali al-Naimi insists that the interventions have been made until now will be sufficient to prevent further decreases in the oil price and before taking a further decisions     to decrease production, it would be better to see the effects of cuts in production that will start in February 1.

For the current situation in the oil markets, the majority blames mild weather conditions in the world. However, another important factor that affects prices in the economics is expectations and when the production levels of OPEC members are analyzed after the production cuts of 1.2 million barrels per day beginning from 1 November 2006 it would be seen that this two new partners Iran and Venezuela have not decreased their production. Moreover, total production of OPEC is about 500.000 above than expected. This reality makes people to ask if they are serious in their statements or is it just for politics what they say? We will wait and see their sincerity.

This week, it was reported that the mild weather conditions is tend to change in the US and this affected negatively the downward trend. However after a while the latest inventory stocks of the US announced and it was seen that the crude oil, gasoline and heating oil stocks has increased in the United States.

As can be seen from the above graph while the crude oil stocks increasing for about 2,15% the gasoline stocks have increased 1,65%. After this information oil prices has turned back to their downward trend and even became $49,90 for a while and than increased to $50,10. (NTV-MSNBC)

To conclude, analysts say that risk factors in the Middle East stay the same; supply disruption that would arise due to a political conflict between the US,  Iraq, Iran or Syria would have a negative effect on prices.  The other two important factors on oil prices will be the weather conditions and OPEC’s decisions in the short term.

This commentary is from USAK’s Energy Review Newsletter
http://www.turkishweekly.net/energyreview/TurkishWeekly-EnergyReview3.pdf
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