Oil Prices Continue to Fluctuate

15/06/2009

Oil prices have fallen sharply to below $70 dollars a barrel (15th June 09), after reaching an eight month high last week of $72.68 a barrel.

US light crude fell to $69.86 and London Brent fell to $69.52, down more than a dollar on the day.

This is in contrast to the start of the year where oil prices doubled following hopes that an economic recovery would boost demand.

"The petroleum markets are starting off the week on a softer note, as retreating equity markets and a firmer US dollar remove some of the wider financial rationale for a long position in crude oil," said Tim Evans at Citi Futures Perspective.

With the unrest in Iran Oil prices are likely to remain volatile. Iran currently supplies about 4.5 percent of the global oil supply so any disruption is likely to drive up prices.

"Certainly the events in Iran could postpone a correction if they take a turn for the worse," said Edward Meir at MF Global.

Rising oil prices lead to higher business costs and reduce profitability. Many businesses have traditionally managed cost increases by passing the changes directly onto the consumer. However, consumers are already under a lot of financial pressure due to the recession.

Businesses should try to seek a more balanced way to manage rising prices by looking at ways to cut internal costs and secure long-term contracts at fixed rates.

Hedley Basford Management Consultants, can help with business advice including business planning and finance, essential when costs of doing business are increasing. 

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