Sunday, August 12, 2012

Israel Advances Into Gaza and Oil Prices Are Rising

This afternoon Israel attacked a key member of the Hamas led government in Gaza. Soon, afterwards Oil prices went up and will continue to rise in the near future as Israel moves into Gaza. Israel killed the letter of Hamas military wing whose name is Ahmed al-Jabari. After more than 115 rockets and missiles have been fired into Israel in the last few days, the Israeli government is ready to act.

Soon after news of the attack on Hamas was announced we saw Oil prices rise as much as 1.4 percent. "The Israeli strike on Gaza has raised the security premium," said John Kilduff, a partner at Again Capital LLC, a New York-based energy hedge fund. "The Israelis made it clear that this may be the first of many strikes. This episode raises tension in an already troubled region."

Even though so far on the year Oil prices have dropped 13 percent we can expect that in the wake of Israel defending itself that oil prices will rise. "This is a clear statement that we won't continue to tolerate this violence against us," Israeli vice Prime Minister Silvan Shalom said. Israel is prepared for an escalation in attacks from Gaza in response, Shalom said. The Israeli army said it called up reserves in advance of any possible infantry assault.

Countries in the Middle East and parts of North Africa account for 36 percent of the world's oil production. These countries also hold 52 percent of the world's oil reserve. "Prices surged on the initial shock that Israel killed the Hamas leader," said Phil Flynn, from Price Futures Group. "Now the market is retreating from the day's highs as cooler heads prevail. Tension between Israel and Hamas is ongoing, not something new."

Oil had been on the decline on the day and had fallen as much as.5 percent before the air strike. Prices of oil had slipped because the US Labor Department had reported a.2 percent decline in producer price index. This was the first drop we have seen since October.

Tomorrow the Energy Department will report that U.S. crude Stockpiles rose 2.65 million barrels last week. While it will also show supplies of gasoline, diesel and heating oil all declined in the wake of Hurricane Sandy. The Energy Department will release the data tomorrow at 11 a.m. in Washington DC, a day later than usual because of Veteran's day which was on the 12th of November.

If you can get into a trade on Oil between 86-87 dollars for the end of the week, it would be wise to take a call.

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