Brent Lower than $108 with Investor Concerns on Budget Talks

The current oil price fell below $108 per barrel as investors continue to worry about the developments of talks to lower the budget deficit of the United States, opposing support from indications of a better outlook on China’s economy.

The first actual developments in the talks started yesterday, with Republican House Speaker John Boehner  moving closer to the primary taxation demands of President Barack Obama. However, investors’ concerns regarding the rate of progress were putting a weight on markets and European stocks.

The crude price per barrel of Brent for delivery in February was 42 cents lower at $107.76 in mid-morning trading. The drop followed and earlier increase to as much as $108.50.

On the NYMEX, the current oil price of the U.S. benchmark for delivery in January was 7 cents lower, to $86.66 per barrel.

The crude prices per barrel recently increased following surveys that showed a growth in the manufacturing sector of China during the early parts of December, and that factories in the United States were experiencing their best month since April.

The United States and China are the first and second biggest consumers of oil worldwide, and better domestic economies would lead to higher fuel consumption within these two nations. Current forecasts expect lower growth in oil demand in 2013.

In March, Brent reached its highest rate of $128 per barrel, and is on its way to finish the year without much change, in terms of percentage, as worries on the economy have countered price-increasing interruptions in supply from the Middle East and other regions, like the North Sea.

The oil revenue of Iran has been reduced by 50 percent this 2012 compared to last year, according to the economic minister of Iran. That is an admission that the sanctions from the West are greatly decreasing the main source of money of Tehran.

By: Chris Termeer

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

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