Oil prices rose and then fell in morning trading Monday as analysts shifted views on which global hot spot would affect commodity markets more in the coming months.
Oil prices popped by $1.15 US a barrel to $47.45 in early market action as commodity watchers assessed the Israel-Gaza conflict, the Ukrainian natural gas dispute with Russia and a recent tension in Nigeria as factors that would reduce crude supplies.
Quickly, however, the U.S. dollar began to rise Monday as traders viewed the same factors as reasons to dump the rubble and other non-North American currencies and buy the American greenback.
That sentiment eventually drove down oil prices by $1.66. Thus, by mid-morning, a barrel of oil for February delivery had lost 51 cents, slipping to $45.83.
Still, analysts feel that the swirling waters of international tension will result in a short-term rise in the commodity's price.
"With Israeli troops going into Gaza, that just heightens fears of the possibility of a wider Middle East conflict," said Ken Hasegawa, an energy analyst with broker Newedge in Tokyo.
"Prices will likely continue to rise in the short term."
Analysts speculate oil prices will price
Three international situations have prompted analysts to take the view that oil prices will rise in the coming weeks.
In the Middle East, Israel's December military action against the Hamas organization in the Gaza strip has analysts speculating about further tension between other Middle Eastern governments, many of whom produce oil, and the Israeli government.
In addition, a contract dispute has led to the government-owned energy company in Russia cutting gas supplies to Ukraine. Those reductions in turn have resulted in less natural gas flowing to the Czech Republic and Turkey with the possibility of other countries getting caught in the Russian-Ukrainian crossfire.
Finally, a separatist group in Nigeria has threatened to bomb that country's main pipelines, a move that could limit oil supplies from the region.
U.S. dollar safe haven?
The same international disputes, however, also have experts believing that the American dollar is a better safe haven compared to the euro, or British pound or some other currency.
The U.S. dollar rose more than two per cent against the euro in Monday trading.
Since oil is priced in U.S. dollars, a rising greenback means you can buy the same barrel of black gold for fewer American dollars, essentially cutting oil prices.
In addition, investors often sell oil, gold or another commodity if they believe the value of the U.S. currency is set to rise. Many analysts believe the currency should rise against the overvalued euro in coming months.
