Is oil our new economic indicator?
An ice-resistant platform meant to drill for oil in the Russian sector of the Caspian Sea.
Six months ago, it looked like the perfect mix to lower oil prices: fears that the U.S. could slip to another recession and a heavy dose of euro zone financial crisis, left most analysts thinking oil prices would continue to fall, perhaps as much as $30 or $40 a barrel. But, that's not what's happened.
Oil has hit a three month high, trading around $97 per barrel. Prices rose again today on news that Italian Prime Minister Silvio Berlusconi will resign after his government passes a new budget law.
Ole Hansen, senior commodities strategist Saxo Bank in Copehagen, says while the political shifts in Greece and Italy are taking headlines this week, concerns about oil supplies will continue to drive prices up for the near term. He says these concerns are mostly focused on Iran and Nigeria. In what could be labeled the really big news today, a new report from the International Atomic Energy Agency (IAEA) today says the agency has obtained "credible" information that Iran is able to create nuclear weapons. Hansen says that raises concerns about how the U.S. or Israel will react, which might threaten supply in one of the world's largest oil producing countries. And in Nigeria, recent unrest in the northern part of the country could spread to the oil producing southern part of the country.
So, as the U.S. and Europe head into winter, it looks like the usual forces are at play when it comes to oil: demand up, supply down and prices will continue to rise.
Also on the show today, The Marketplace Daily Pulse is down today on news that the number of metal containers coming off boats has dropped on the biggest shipping route in the world. Some economists blame slow growth in U.S. for this, but is it possible that not as much stuff with Made in Name-Your-Asian-Country labels coming in at the ports could be a promising sign for American manufacturing?