Current Oil Prices Increase after ECB Commits Euro Protection

The current oil prices rose after the ECB committed to do whatever it takes to preserve the euro as currency of the 17 nations in the debt-laden region.

The worsening problems in Europe have increased speculations of impending drastic measures to promote the growth of the economy, leading to a higher demand for crude and other commodities.

European oil demand has fallen with several countries experiencing recession. In one of its most recent monthly press releases, the International Energy Agency calculated Europe will likely demand 14.6 million barrels per day in the current year, a lower level compared to last year’s 15 million bpd. The EU region comprises around 16% of the oil consumption worldwide.

At an investment conference held in London, President Mario Draghi of the ECB recently pledged to do everything they can to protect the euro. Moreover, he made a suggestion that the institution can do something to reverse the trend in rising interest rates faced by the countries enduring financial challenges, such as Italy and Spain.

Benchmark crude gained 42 cents to end at a per barrel oil price of $89.39 in the NYMEX after moving earlier to $90. In London, Brent crude also gained 88 cents to finish at a per barrel oil price of $105.26 after reaching $106.18 earlier.

Concerns have become stronger that Spain may require financial bailout assistance similar to Greece, Portugal and Ireland due to high borrowing rates. That would strain the finances of Europe because Spain has the fourth biggest economy in the eurozone. “Too big to fail” may actually be “too big to bail” in this case.

The comments of Draghi were the opposite of his previous policy statement during the last several months as he was previously encouraging government responsibility to enact fiscal – not monetary – measures in order to bring investor participation back to the euro.

Phil Flynn of the Price Futures Group speculated that current oil prices cannot hold the gains they obtained earlier because Draghi’s statements lack specifics. He questioned what Draghi really means when he said that they will do everything it takes.

Elsewhere in the energy markets, the futures of natural gas gained 3.5 cents to end at $3.1050 for every 1,000 cubic feet following the government’s statement that the supply of the country grew in the past week. The inventories of natural gas were higher by 15.8% compared to its average in five years, as of the 20th of July.

Heating oil gained 2.45 cents to finish at a per gallon price of $2.8685 and gasoline futures gained 2.09 cents to end at 2.8138 a gallon.

The nationwide current gasoline price average gained less than a cent to $3.49 a gallon, said the AAA, OPIS and Wright Express. That rate is higher by almost 5 cents compared to last week but it still lower by 20 cents versus the same period last year.