China GDP, Iranian embargos propel oil investments

Crude oil futures posted strong gains on the Asian commodity index today, with West Texas Intermediate figures posting above the resistant $100 per barrel mark, as China’s Gross Domestic Product numbers proved considerably better than expected. The reports out of the emerging nation bolstered the overall projections for the path global economy could take in 2012 and gave oil investment strategies a strong lift.

WTI prices for delivery in February gained $1.78 to settle at $100.48 per barrel in electronic trading on the New York Mercantile Exchange. Oil investments in Brent mirrored the upturn of their American counterpart, posting a 92 cent increase, and finishing the afternoon trading at $112.26 per barrel on the ICE Futures Exchange in London.

The bulk of risk-permeated assets profited from the optimistic financial news, with the regional stock markets rising sharply. The reports came as a drastic easement for the addled global economy, especially after several analysts stated that China was developing at a much faster rate that it could support in the last quarter of 2011. The euro also advanced against the dollar, giving crude oil futures and oil investments another point of support on the charts. Dollar-priced commodities tend to benefit whenever the greenback loses ground on the currency index, as the market becomes more appealing for foreign traders.

China’s Gross Domestic Product gained nearly 9% since last year, and while the figures are more tepid than those of 2011’d third quarter, they still sit comfortably above the initially projected 8.6% that Dow Jones issued earlier in the year.

China’s rapidly expanding development efforts have been one of the crucial exporting sources for crude oil and a number of other raw commodities, and the progress the prolific nation’s GDP is showcasing at the moment is welcome relief for the energy industry. Several analysts have also predicted that China’s oil investment figures will likely continue rising well into January, since the nation’s inventories have fallen drastically over December.

Crude oil’s stance on global charts was pointed upward due to the continuously worsening geopolitical disputes permeating the Middle East. The tensions surrounding Iran’s nuclear program and the ensuing fallout have yielded several rallies on the fuel’s price polls, and with the situation seemingly more grave, crude prices stand to continue rising.

The turmoil circling Iran has so far managed to overshadow the tremendous obstacles crude oil investments face in the euro zone’s debt crisis. Though the troubled region is still far from a permanent or viable resolution, the US’ requests for global embargos on Iranian oil have now taken over most headlines. It now appears that Asia will be the first region to cede to the US’ demands and find alternative suppliers to field their energy needs.

Saudi Arabia has put forth an offer to bolster its production in order to make up for whatever gaps Iran’s absence will bring to the sector. The bountiful nation is the only OPEC member in a position to sustain such a grand increase in output. The country’s Oil Minister has stated that Saudi Arabia is prepared to ramp up its production efforts by more than 2 million barrels per day immediately. The increase should be ample enough to begin covering Iran’s daily global output of 2.5 million barrels.

However, the political fallout that Saudi Arabia’s decision will wreak on the state of global economy and crude oil investments in unclear at the moment. Iran has issued several vague threats against its fellow OPEC country, promising to shut off the Strait of Hormuz is the relentless embargos against its exporting industry persist.

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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