KATHMANDU: Despite low economic growth rate in the second quarter of 2012, China has successfully demonstrated its supremacy in the

global economy. Its improvement in GDP data has lifted the confidence of the world stock and crude oil markets recently. Countering expectations of many, the growth rate has provided some relief to investors and helped equities trade higher regardless of the end of energy strike of Norway, which had threatened to halt the crude oil production from Europe.

Moreover, the weekly prices of the Organisation of Petroleum Exporting Countries (OPEC) continued to enhance reaching USD 97.26 per barrel according to a Vienna-based cartel. The prices of oil rose also because of the US government’s announcement

of assistance to shipping firms and banks in Tehran to avoid sanctions. It is obvious that the US intensification of the embargo on Iranian crude oil has contributed to a slight increase in prices worldwide.

In fact, the volume of Iranian crude oil entering the international market already declined because of sanctions. According to OPEC’s latest oil report, the average daily output in Iran fell to 2.96 million barrels in June, representing a daily reduction of 188,000 barrels as compared to May. Furthermore, the US crude oil inventories fell in the first week of July as per the consent of American Petroleum Institute (API).

Likewise, pertinent speculation had exerted pressure on international crude oil price much before the announcement of the US government targeting front companies, including shipping firms and banks helping Iran. On top of it all, Iran still continues to be the major player in the oil market because if there is any decline in fuel supply, Iran is on the race to take the prices up ahead with itself.

Besides, a stronger dollar tends to exert pressure on oil prices because it means higher oil prices for the non-dollar buyers and the sanction by Obama’s administration on National Iranian Tanker Co has pushed crude oil prices sharply to the upside. In the market where uncertainty is the only certainty and knowing how to live with insecurity is the only security, how are investors going to cope with the fuel that is about to burn?

(The author is assistant manager at the business development department of Mercantile Exchange Nepal. He can be contacted through media@mexnepal.com)