Oil prices unlikely to rise without geopolitical shock

Oil prices have rallied by 10% over the past two months buoyed by improving sentiment on economic recovery and a decline in the US dollar. Based on historical trends prices could well increase further during 2013. However oil prices are now near the point at which energy costs have been a drag on economic activity in recent years, suggesting further increases in oil prices may be limited. Without a geopolitical shock oil prices are unlikely to move significantly above current levels. 

Brent crude prices have been steadily moving up over the past couple months from around $106 per barrel in early December to just under $117 per barrel currently. Seen in a longer context however this only brings prices back to mid-September levels and prices are still some $10 per barrel below the recent highs seen in March 2012. Previous rally’s in Brent crude prices above this level have largely been driven by concern over geopolitical risks, notably in spring 2011 with the Arab Spring uprising and then in spring 2012 due to concerns over Iran’s nuclear ambitions. Where next for oil prices?

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Further reading: Delta’s refinery troubles and is manufacturing cool?

And You Might See Me Tonight With an Illegal Smile Thomas Hawk / Foter.com / CC BY-NC

Dangerous Curve Ahead, the IMF Warns China (China Real Time Report)

Proof That The World Isn’t Freaking Out About China And Europe Anymore (Business Insider)

Delta’s oil refining efforts hit turbulence (FT)

Is Manufacturing “Cool” Again? (Project Syndicate)

Global economy at ‘significant risk’ over resource scarcity (Supply Management)

70% of companies believe climate change will hit business (Clean Biz Asia)

US cattle herd to fall to 60-year low. But does it matter? (Agrimoney)

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Manufacturing activity picks up momentum in early 2013

Purchasing manager surveys from the US, China and the Eurozone area indicate that manufacturing activity picked up momentum at the start of 2013 with purchasing managers indices reaching 22, 24 and 10 month highs respectively. Manufacturing activity continues to contract in the Eurozone area, remaining below 50 for the past 18 months.

HSBC Jan 2013 PMI US Euro China

In the Eurozone, despite rising input prices, cost inflation was at its lowest level for four months. This comes despite the sharpest rise in supplier lead times for 18 months Similarly, in the US cost price inflation continued to ease from its November peak. Markit report that iron, steel and packaging were most commonly reported by manufacturers as having increased in price. In contrast, Chinese input cost pressures increased at a faster rate but remain subdued.

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