Oil Futures Rise as Greece Passes Austerity Measures
Greek parliament’s approval of new austerity measures this morning has resulted in rising markets and futures worldwide, and crude oil has been no exception. Crude futures have been on the rise in anticipation of today’s vote, and are up 2.80% today to $95.49 after dropping below $90 just last week. Crude futures were originally pushed down last Thursday by the International Energy Association’s announcement that they would be releasing 60 million barrels of oil to offset shortages due to the Libyan conflict, with the U.S. Strategic Petroleum Reserve releasing 30 million of those barrels.
The IEA’s decision came after OPEC failed to raise the cap on oil production to offset shortages. Now almost a week after the IEA announcement, OPEC is now asking that they refrain from releasing reserves. OPEC Secretary General Abdalla Salem El-Badri hopes to set up a meeting with IEA Executive Director Nobuo Tanaka to discuss the release, which he says would “disturb the market”. Earlier this week, El-Badri joined other OPEC figures in criticizing the IEA’s move.
Despite OPEC’s inability to come to a agreement to increase production earlier this month, El-Badri insists that IEA intervention is unnecessary, that consumers and producers should work together to remedy supply disruptions, and that OPEC members are always prepared to supply market needs. El-Badri is saying that, despite OPEC’s failure to reach a consensus on the issue at their June 8 meeting, there are some member countries that are ready to add more oil to the market. El-Badri claims that, “The IEA didn’t give time for those countries to fulfill their commitments,” and that they were already prepared to meet needs before the IEA’s announcement, but were not notified of the release ahead of time.
While the IEA’s decision originally pushed down crude futures, and subsequently gas prices, they have already begun to rise as the markets look to have their third day of significant gains. The NYSE Arca Airline Index (NYSE:FAA) is one of the few losers today, as airline stocks were up on news of lower fuel prices last week. Roughly one-third of the cost of running an airline is fuel. As of yet, it’s unclear whether crude futures are rising because they fell more than was warranted by news of the release last week, or whether they are simply being pulled up by Greece’s austerity vote this week, along with the general markets and other futures like gold (NYSE:GLD) and silver (NYSE:SLV).