By Russell Glaser – The price of spot crude oil climbed almost 1% yesterday on reports that the federal government would limit new offshore drilling permits that would allow the expansion into shallow water. The report was later denied. However, this did not stop spot crude oil prices from holding their gains
The report startled traders into buying spot crude oil as investors bid up the price to $74.21, from an opening day price of $73.54.
Due to the ongoing oil leak that has oil flowing into the Gulf of Mexico and BP’s inability to plug the deep water oil rig leak, the Obama administration has already enacted a moratorium for new deep water drilling sites. This could slow new production of crude oil supplies in the long term. A second moratorium on new shallow water drilling sites could affect the crude oil trading in the near term as the length of time to bring oil to production from shallow sites is much less than deep water sites.
The rumor was later denied by officials, but the sharp rise in price underscores just how susceptible crude oil trading has become. Supplies are already beginning to be tightened as refineries have cut output due to the economic slowdown. An oversupply of crude oil stocks is apparent in the market from the continuing increase in the weekly U.S. crude oil inventory report.
Concerns of an improving economy will be addressed today with the release of the U.S. Non-Farm Employment report, also known as NFP, and the nation’s official unemployment rate. This month traders are expecting a large increase to employment, and a 0.1% decrease in the unemployment rate.
Spot crude oil prices could continue their climb with a breach of the resistance level at $75.60. This could propel prices to the next resistance level which lies just below $78.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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