Brent crude oil priced in euros hit a new high closing price today of €94.83/barrel, exceeding the highs reached in 08 as well as early this year.
This rally has been driven by four factors:
1. The euro is down close to 15% over the past year.
2. Draghi's "Believe me, it will be enough" statement increased demand for "risk assets". Bets on additional central bank stimulus are pushing up crude prices.
3. An unexpected decline in US crude and gasoline inventories added to the upward pressure on crude.
4. Israel's rhetoric on Iran is not helping matters either (particularly when it emanates from official sources). With tighter US supplies, it doesn't take much to spook jittery oil traders. The "Iran premium" currently built into the crude prices is not insignificant.
Bloomberg/BW: - Israel would be willing to strike Iran’s nuclear facilities, even if doing so only delayed its ability to produce nuclear weapons for a few years, Israeli Ambassador to the U.S. Michael Oren said.As discussed before, these elevated fuel prices (based in EUR) will inflict serious damage to growth prospects for Eurozone nations - particularly for Italy who is already struggling with a year-long economic contraction.
“One, two, three, four years are a long time in the Middle East -- look what’s happened in the last year” in terms of political change, Oren said today at a Bloomberg Government breakfast in Washington. “In our neighborhood, those are the rules of the game.”
Israeli leaders have stressed this month that time is running out for a diplomatic solution to the nuclear program that Israel regards as an existential threat.
“Diplomacy hasn’t succeeded,” Oren, 57, said today. “We’ve come to a very critical juncture where important decisions do have to be made.”