(MENAFN - Kuwait News Agency (KUNA)) Oil prices have been rising for nearly three months despite healthy supply levels due to geopolitical risk concerns, local supply dynamics and less pessimism about the US economy, Qatar National Bank (QNB) said Saturday.
In its weekly analysis, QNB said prices were high during much of the first quarter of 2012, when benchmark Brent crude traded close to USD 125 per barrel (pb). Prices eased in April, and then slid substantially in May and June, to a low of USD 89 pb.
QNB attributed the slide to concerns that opposition parties would win an election in Greece. The market feared that such a result would lead to the country exiting the euro, damaging confidence in the single currency and potentially sparking a recession in the region which would reduce its oil demand.
At the same time, there were signals of economic deceleration in key emerging markets, such as India and China, responsible for much of world oil demand growth.
QNB said prices began to rebound soon after the Greek election on June 17th, as the market's fears were not realised. The rebound has continued since then, with a few brief corrections, despite a stream of negative economic data and concerns about Spain's banks and its indebted regional governments.
In early August, added the bank, the market has been buoyed by fresh hopes the European Central Bank would ease the Eurozone debt crisis by buying government bonds. In addition, stronger than expected job creation in the US has been interpreted as a sign that the economy may be recovering, although unemployment remains at 8.3 percent.
The QNB report said there were hopes that monetary easing in China would help maintain its economic growth rate above seven percent. These factors pushed Brent up to USD 112 pb on August 7th, its highest level in nearly three months.
Other factors that have contributed to the recent rise in oil prices include geopolitical concerns in oil producing regions, such as current events in Syria along with the supply impact of sanctions on Iran.
Local factors have also come into play. Brent oil, from the North Sea, provides a pricing benchmark for most of the worlds crude oil, with the remainder largely trading the West Texas Intermediate (WTI).
Until late 2010, these two major crudes traded within a few dollars of each other, but a glut of pipeline oil in the central US has pushed down the value of WTI relative to Brent, which is traded by tanker.
Brent's premium on WTI had halved during the second quarter of 2012, but it has since rebounded. In part this is because scheduled maintenance operations in September on some of the largest North Sea fields, such as Buzzard and Troll, are due to temporarily reduce supplies of Brent.
This reduced supply would tend to push up prices, and indeed the premium of Brent over WTI has increased steadily since mid-June, accounting for about a third of the increase in Brent prices since then.