Improved price projections boost oil investments
Crude oil futures edged higher on the commodity index today, climbing well above $101 per barrel after reports hit the sector that the U.S. government boosted their price predictions for the remainder of the year and into 2012. The escalating tensions between Iran and the Western powers also played a part in bolstering oil investments.
West Texas Intermediate crude oil prices for delivery in January gained 29 cents and ended the day at $101.28 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude oil futures for January settlement, a benchmark used to price foreign oil imported by the U.S., gained 98 cents and ended the day at $110.51 per barrel on the London-based ICE Futures Exchange.
Oil investments received a considerable boost on the sector charts midway through the day’s trading when the Energy Information Administration announced a raise in its projections for crude oil prices for the last quarter of 2011, and into the first of 2012. The projection saw crude oil futures advance to $98 per barrel on average, a drastic upturn from the previous forecast of $91 per barrel. The favourable predictions for the path oil investments will take in the coming year depend heavily on the launching of a new Canadian pipeline, which will transport oil from U.S. storage hubs in Cushing, Oklahoma to refineries along the Gulf Coast. The pipeline is expected to significantly reduce the amount of crude inventories held in Cushing, thereby bolstering domestic demand.
Oil investments were also affected by an announcement from Standard & Poor’s detailing the agency’s plan to put fifteen euro zone nation under debt ratings review. Economists and traders alike are bracing for the damage a series of downgrades would have on Europe’s already fractured economy. A recession would be the most likely repercussion, if the stronger economies in the region see their AAA rating suspended.