After becoming $49.90 in the first half of the January, oil prices turned back to their increasing trend in the market. Firstly, cold weather conditions after mild weather caused demand for heating oil to increase, then OPEC’s production cut in the beginning of February increased oil prices up to around $55-57 in the market.  Everyone was waiting problems to emerge once again in the Middle East and the first signal was the beginning of negotiations among UN Security Council members for imposing stronger sanctions against Iran. All members agreed on a new package on the third week of the March and last Saturday voted for it unanimously on the UN Security Council. However, just a day before this vote to take place, on 23 March Iran captured 15 British naval personnel in the Shatt al-Arab waterway, which separates Iran and Iraq. Everyone has forgot all the other things and started to talk about these 15 soldiers after then.

UK claimed that Britons were seized in Iraqi waters and demanded its sailors to be released. Moreover, on March 28 Foreign Secretary Margaret Beckett in a statement announced that they would be imposing a freeze on all other financial bilateral business with Iran. After all these developments oil prices soared and Brent oil became $68.6 and WTI $66.07 on the spot market.

Oil Prices

Source: Financial Times

In two weeks time oil prices increased for about 15% and the problems in the Middle East was dominant in these price increases.

In addition to these developments, on Friday Iran’s Central Bank governor said that Iran had plans to stop selling its oil in dollars completely and added that more than 50 percent of Iran’s oil income is paid in other currencies and they were reducing the dollar share and asking clients to pay in other currencies. He also stated that Iran had commercial relations with more than 70 countries, including (in) Asia and Europe. It can be noted that Iran is the fourth biggest oil exporter in the world.

In the US market, oil stock values of the week before were announced on Wednesday. According to these data not only gasoline, but also crude oil and distillate stocks were declined. However, when compared to previous weeks this decline is relatively smaller. The Gasoline stocks decreased 258000 barrels and this value was 0.8 million for crude oil and 0.7 million for distillate.

Oil Stocks in the US

Source: Energy Information Administration

Energy analysts claim that refiners are exiting the maintenance season and as a result gasoline supplies will begin to increase in the near future. In this period of the year gasoline becomes more important as an indicator with the beginning of driving season and the ending of winter.

Gasoline in the US

Source: EIA

For this week, according to a Bloomberg’s survey, 15 of 36 analysts expect a decrease in oil prices and 14 of them expect a rise, whereas only seven of them are neutral. For the oil markets the most important indicator that affects prices can be shown as Iran crisis for now. So, if this week Iran and Britain can begin their negotiations about the seizure of Britons, this will help to tension to decrease a little in the Middle East as well as the pressure on the oil prices.

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This commentary is from USAK’s Energy Review Newsletter
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