Black Gold, Black Swans

Brent crude oil prices have fallen to $98, down from $112 only three months ago. Two major macroeconomic forces argue for lower oil prices. The US dollar has surged against the world’s major currencies, pressuring the entire commodities complex. Gold has fallen to $1234 despite geopolitical risk in Ukraine and Iraq/Syria, thanks to the sharp rise in the US dollar. The fall in Brent was also amplified by a supply cut in the North Sea and lower demand for crude from Germany. French and Italian refineries, reflecting European economic weakness. The oil markets have ignored supply shock risk in since the civil war in Iraq did not result in any disruption of Iraq’s 2.5 million barrels (MBD) of Basra Light exports. Libya has also managed to raise oil output above 500,000 barrels a day, while militia sieges in the oil port of Ras Lanuf have ended. A US court even…

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