Well Oiled

An additional half million barrels of oil are due to be released into the world markets every day in June but analysts predict prices will remain high. Iraq is expected to contribute 125,000 barrels per day (bpd) in June. Analysts, however, are not impressed and indicate that prices are likely to stay high, or even rise in the medium term. Prices spiked to a record US$127.82 on Friday 16 May before closing at US$126.29. Goldman Sachs has raised its forecast for oil prices in the second half of this year to an average of US$141 a barrel.

Iraqi oil minister Hussain al-Shahristani told Reuters on Monday that high prices are in fact due to an increase in speculative trading and that an increase in Opec production would do little to lower prices. As the US dollar has weakened dollar-denominated commodities have become relatively cheap. This combined with poor returns from the stock market and the resultant risk aversion among investors has driven an increase in commodities, driving prices up.