Crude oil prices reached 2-year low

Noam Stiekema

The decline in oil prices to their lowest level in two years surprised many observers amid the peak of violence in Iraq, heightened tensions between the West and Russia and sanctions against Iran. Meanwhile the increased oil reserves in North America and particularly strong demand drove prices down below 100 USD per barrel, the incident […]

Crude Oil sonds

Crude Oil sondsThe decline in oil prices to their lowest level in two years surprised many observers amid the peak of violence in Iraq, heightened tensions between the West and Russia and sanctions against Iran. Meanwhile the increased oil reserves in North America and particularly strong demand drove prices down below 100 USD per barrel, the incident highlights how the shale revolution is the political and economic advantage for Washington and its Western allies.

Russia and Iran are extremely dependent on oil sales and a shortage in their budgets at current price levels, weaken their positions in the negotiations for Ukrainian sovereignty or Iranian nuclear deal, analysts say. Moreover, the larger oil production from the United States and Canada provides a buffer against the threat of response restriction on supply from Russia or further supply disruptions from the Middle East. The increase in yield is definitely in favor of the United States, says Professor Paul Stevens NGO Chatham House in London.

“The Russians are very strong risk at lower oil prices. Did not know to what extent this may affect their behavior towards Ukraine, but will definitely feel the pressure on the budget”, he said.

The Russian ruble has reached a historical low against the dollar as the country’s economy has been affected by American and European sanctions introduced for the role of Moscow in Ukraine. This increases the price that the Russians have to pay for the bulk of imports – from vegetables to luxury goods. Daily oil production in the United States rose sharply after the financial crisis. In 2010, the country still imported half of the oil it consumes, but Energy Information Agency of the United States predicted that imports would drop to just over 20 percent next year.

Although the United States largely maintain its ban on the export of black gold, a lot of oil from West Africa and the Middle East is looking for a new home. While there are likely profits of American energy companies to be undermined by low prices, consumers will be able to spend less on petrol.

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