Crude Oil started climbing again, after a brief lull in the prices on Monday. Last week, the prices of Black Gold rallied due to fears of a supply disruption from the MENA region, amid political tensions in Egypt. The WTI crude rose for the second day, on Wednesday and reached a 14-month high, in the backdrop of a declining US crude stockpiles and the surge in optimism due to a rising US stock market.

On Monday, the US crude oil prices had cooled off a bit, as it declined by 8 cents to settled down at $103.14, slightly lower than Friday’s closing price of $103.22. In line with this trend, the Brent Crude’s future contract too dropped by more than 30 cents to hover above $107 a barrel. This was after it had reached a high of $108.04 in the previous session, its highest since April 4.

Later, on Tuesday, the Front-month US Crude oil Futures advanced by more than $1 to reach a high of $104.76 per barrel. This was after it had reached low of $102.31 per barrel the previous day. Whereas, the Brent Oil Futures too climbed by 38 cents to trade at $107.81 per barrel.

On Wednesday, continuing this uptrend, the WTI Crude for August delivery gained by 39 cents to trade at $103.53 a barrel on the NYMEX. This was its highest since May, 2012. Meanwhile, the European benchmark for Crude oil, Brent Crude’s prices for August settlement rose by 38 cents to $107.81 a barrel on the London-based ICE Futures European Exchange.

After the last week’s steady rally in the crude oil prices, there was a brief pause in the uptrend at the start of this week. This was apparently due to the resumption of the supply from Libya’s Sahara oil fields, after officials reached a truce with the army that had earlier shut down the operations. On the other hand, the US Dollar was surging ahead with a 0.8% rise in the dollar index, which tracks greenback’s performance against its six major trading currencies.

A rising US Dollar always tends to weigh down on the Crude oil prices. This is because as US dollar advances the investor interest in Crude oil assets starts waning. This consequently brings down the prices of all Crude oil instruments in the Energy markets.

 However, on Tuesday, the API released data that revealed a sharp fall in the crude oil inventories. The crude stockpiles had declined by 9 million barrels against the expectations of a mere 3.3 million drop. Apart from this the significant gains in US stock market instilled optimism in the US economy, one of the world’s biggest Oil consumers.

With the US summer driving season setting in, the oil refineries expect a rise in demand for gasoline. All of these factors stoked the expectations for a significant rise in demand for crude, sending the prices of Crude oil contracts on a strong rally.

Moreover, fresh violence broke out in Egypt killing dozens of people during a protest rally against President Morsi’s removal. This raised speculations of a possible civil war breaking out in Egypt, raising fresh concerns over supply of Crude oil through the Suez-Mediterranean supply lines. This further seems to have driven up the Crude oil prices.

However, the crude oil supplies are bound to improve from parts of Middle East. The crude oil flow in the supply lines from Kirkuk in Iraq to the port of Ceyhan in Turkey are expected to resume soon, after they had been interrupted due to leaks in the pipeline. As long as no civil war erupts in Egypt, the Suez-Mediterranean supply lines are bound to be fully operational. Therefore, an increase in supply may put a lid on the rising Crude oil prices in the near future.

Note: This blog is just an expression of the author’s opinion and cannot be deemed responsible for any losses incurred.