The Swinging Oil Prices

Oil prices are rising again, climbing to $73 on Friday. The ascend has been due to coule of reasons such as storm brewing in the Caribbean, reduction in Nigeria's output capacity due to militant attacks, BP cutting its Prudhoe Bay production due to a technical fault and concerns over the possibility of Iran blocking oil exports if sanctioned are imposed on it by the United Nations over its nuclear program.

According to the U.S. National Hurricane Center’s forecast the tropical depression over the south-eastern Caribbean is on the verge of becoming Tropical Storm and is expected to head northwest towards the Gulf of Mexico by the middle of next week. Should this happen, the production will get battered and will put more stress on the prices.

In Nigeria, which is the largest oil producer in Africa, about 40 foreign oil workers have been kidnapped since January this year. Such kidnappings and attacks on oil facilities by militant youths have forced Nigeria to cut production by 670,000 barrels per day, or 26 percent of its crude production. The string of abductions is continuing unabated with an Italian oil worker being kidnapped on Thursday. These events will lead to further production losses thus creating a shortfall in supply of oil.

The Prudhoe Bay production has already been running at about half its normal capacity after pipeline corrosion. On Wednesday, following a technical fault, BP has cut the Prudhoe’s production to 110000 bpd. The cut in production at the Prudhoe Bay field in Alaska, the biggest oil field in the U.S., is for a second time in less than a month.

Finally, concerns about the possibility of Iran, the world's fourth-biggest oil producer, blocking oil exports if sanctions are imposed over it by the United Nations over its nuclear program have given an impetus to the prices to rise. The U.N. Security Council has demanded that Iran halts its nuclear work by a deadline of August 31. All this could lead Iran to disrupt oil supplies.

There is sinking of foreign exchanges under pressure from indications of sufficient crude oil and petrol reserves in the USA, which was greater than a year ago.