Oil prices at a 13-month low; slips to $102 per barrel

The unrest in Iraq, Libya, Ukraine and Gaza, coupled with an accelerating American economy, would normally spell a spike in crude oil prices. However, prices have slipped to a 13-month low of about $102 per barrel.

The easing of prices despite continued threat of disruption in oil supply can be attributed to three critical factors. First, the International Energy Agency (IEA) believes that supply glut is shielding the market from price disruptions.

The agency has lowered its estimate for oil demand growth for 2014 and 2015 after an annual expansion in fuel consumption during the quarter to June slowed to 7,00,000 barrels per day. IEA believes that the oil markets look better supplied than expected, with even an oil glut reported in Atlantic basin. The extent of supply surplus can be gauged from the fact that a major exporter such as Libya is struggling to find a buyer for its crude oil.

Second, Russia’s weak financial position is likely to keep its policy-makers from creating supply bottlenecks despite the country’s stand-off with the European Union. Last, the United States’ reliance on crude oil import has reached its lowest level since 1970.