The main reason for the crude oil rise in New York is the $700 billion financial rescue package passed by the U.S senate with the aim of sustaining the economic growth in a nation which consumes highest energy in the world.
Anthony Nunan , assistant general manager for risk management at Mitsubishi Corp. in Tokyo said “With the bailout passing, people feel that maybe the market will stabilize, the economy will be rescued and crude prices will go up. This removes some of the uncertainty, but the big problem is going to be the House.”
There have been significant rises in crude oil. For November, it rose as much as $1.84 or 1.9 percent, to $100.37 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $99.30 at 11:19 a.m. Singapore time.
Apart from this there is fluctuation in prices which shows 32% decrease $147.2 barrel on July 11. Moreover, the energy department revealed that the inventories rose 4.28 million barrels to 294.5 million last week.
Due to the falling demand in market and efforts of recovery for the economic condition, oil prices have never been as volatile as now since the Gulf War of 1991.
“Everyone is expecting the market to dump, and it’s not, so everyone is sitting” and waiting. So, in that sense, you have heightened expectations and that always raises volatility.” said Jonathan Kornafel, a director for Asia at Hudson Capital Energy in Singapore.
Another consequence of the decreased demand is reduction in the profits of motor fuel producers. It needs to be noted that a price difference between crude oil and gasoline fell to 66 cents a barrel today which is also 80 percent less than last year.
“If you look at the refinery margin right now, it’s basically trading next to zero and that’s with the hurricanes shutting a number of facilities. In that situation you’d expect it to blow out, but it’s continued to weaken and that points to the demand expectations in the U.S. better than anything.” added Kornafel.