June 2014: The Month In Charts

Despite advances made by nuclear and renewable energy, our world still runs on petroleum and turmoil in Iraq and Ukraine are affecting the markets. Is that old adage “buy on the sound of gunfire” still true?

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The Reuters monthly poll of 26 analysts predicted in June that Brent crude oil would average $108 a barrel in 2014, the highest average forecast of a Reuters poll so far this year and well above the $105.90 average projected in the May poll.

Oil markets have been rattled by supply concerns due to the Ukraine crisis, while a takeover of large areas of Iraq by Sunni militants has stoked fears of disruption in exports from OPEC’s second-biggest producer.

Although oil exports have not been disrupted so far, the geopolitical uncertainty is likely to keep supporting prices in the short term, analysts said.

“Supply-related headlines and agitation (in Iraq and Ukraine) will keep the speculators on the long side of the market,” said Thomas Saal, an analyst at INTL Hencorp Futures, LLC in Miami.

Iraq’s new parliament convened on July 1 under pressure to name a unity government to prevent the country from splitting apart after an onslaught by Sunni militants who have declared a “caliphate” to rule over the world’s Muslims. However, the legislature later delayed its next session until August.

Meanwhile, in Ukraine, Kiev renewed military operations against pro-Russian separatists in the eastern part of the country, as Russian President Vladimir Putin vowed to protect the interests of ethnic Russians abroad.

Another factor supporting oil prices is demand from Asia. In China, the world’s second-biggest oil consumer, factory activity hit multi-month highs in June, official and private surveys showed, reinforcing signs its economy is steadying as the government steps up policy support.

Indicators are that cheap oil won’t be in the pipelines anytime soon.

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