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The shortfall was immediately seen as a sign the economic rebound earlier this year is slowing. For oil traders, economic slowdown means a slowdown in demand for petroleum.
This poses a bit of a quandary for the White House. On the one hand, people want cheaper gasoline. So watching crude slip below $100 a barrel for the first time since February should give a pop to President Obama’s re-election campaign.
On the other hand, people want jobs. Weak employment data hurts Obama’s re-election hopes. Apparently strong job growth and cheap oil are incompatible. At least that’s what today’s market action is telling us.
Of course, the U.S. economic climate is only part of the picture. China is also slowing down and Europe is in the midst of a debt crisis that has raised pitched political battles throughout the euro-zone. All of this hurts oil demand.
Meanwhile, Saudi Arabia, OPEC’s big dog, assures us the world has plenty of oil, an assertion supported by ample fuel supplies in most Western nations. This has unleashed the bears, who are running riot today, convinced the market is oversupplied.
But wait a second. Whatever happened to Iran? Weren’t those same traders trembling two months ago over the terrible prospects of an armed showdown with the world’s fourth-biggest oil exporter over its nuclear program?
Played correctly, the White House could spin today’s drop in oil prices as a foreign policy coup: Iran has been defanged, its threat to the oil market silenced. That would take some heat off April’s weak jobs numbers, right?
Right. Except for the fact that Iran’s nuclear program is still intact. While currently out of the headlines, Iran remains a perennial source of concern in the oil market. And there are others. Hurricane season is soon here and every little dip in atmospheric pressure over the Atlantic will hand traders a reason to run up prices.
Let’s face it. While the fundamentals of supply and demand might no longer support $100-a-barrel oil, market fundamentals are quickly trumped by fear, whether genuine or feigned.
So think of Friday’s drop in crude prices as a bunch of traders merely hitting the rest button. They’re already looking for an excuse to again push prices higher, and they’ll find plenty in the weeks ahead. We provide Professional technology, excellent product quality and intimate after-sales service when you purchase Flotation cell, Mobile impact crusher, from our company.As a professional mining machinery exporter, we will win your trust with our delivery speed, Enterprises Credit and product quality.
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