Concerns that oil supplies from the Middle East will be disrupted have caused oil prices to rise by twelve percent in the last week. It is expected that oil prices will be pushed much higher.
Bloomberg Press reports that crude oil rose for a second day following the air strikes in Gaza. China is planning on supplementing its oil stockpiles which caused prices to rise. The United Arab Emirates announced production cuts this month.
The militant Islamic group, Hamas, “that seized control of Gaza last year,” is backed by Iran and Iran holds the world’s second-largest oil reserves. Because Iran “sits on the narrow sea channel through which oil from the Persian Gulf is shipped,” the world fears a disruption in oil supplies.
Crude oil for February delivery rose as much as $4.49, or 12 percent, to $42.20 a barrel in electronic trading on the New York Mercantile Exchange, the biggest gain in a week. It was at $40.24 at 12:38 p.m. in London. Today’s gain pares oil’s plunge from its $147.27 a barrel record on July 11 to 73 percent.
The dollar continues to weaken, losing more than 2 percent against the euro.
OPEC, which supplies more than 40 percent of the world’s oil, agreed to cut back output by 2.46 million barrels as of Jan. 1.