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March 30 2015, 8.45am GMT


Middle East tensions, nuclear talks and storage capacity are all affecting the price of oil.

WTI oil fell 5% on Friday as global events influence traders to trim their investments. Whereas the military action started last Thursday between Saudi Arabia and the Yemen pushed oil up to $52.45 per barrel, on Friday the markets dropped the commodity as news came through of conciliatory talks between Iran and six world powers - US, Germany, France, UK, China and Russia.

The Tehran talks, currently being held in Switzerland, regard Iran’s nuclear development. Iran says their nuclear development is specifically for peaceful means, whilst other world governments want to restrict the development to ensure that weapons cannot be facilitated through the Iranian nuclear programme, and rigorous inspections are scheduled. The P5+1 group - the five permanent members of the UN Security Council plus Germany, are looking to suspend Iran’s hyper-sensitive nuclear development for 10 years and restrict the number of centrifuges in operation to 6,000.

In the meantime, 12 year old sanctions against Iran’s oil supply still hold. But if the talks are successful, the oil market could see Iran’s oil production hit the world market yet again, adding to global supplies and lowering the price. The deadline for a framework agreement to be reached is the end of March – Tuesday.

On Friday, oil dropped and continued Monday morning in advance of any announcement on Tuesday. Oil currently stands round the $48 mark.

Also in the Middle East, tensions over Yemen are increasing as reports in the press on Saturday allege that Saudi troops have now entered Yemen in support of the Yemeni government to suppress a Houthi rebel uprising. This continued military action, started on Thursday, is seen as a risk to oil supplies from the region, hence oil prices going up last week.

Meantime, supplies are outstripping storage capacity, and as the U.S Energy information Administration report Crude Oil Inventories on Wednesday, the forecast is not out at present but previous records note that the actual reported figure has come in above expectations for the past 11 weeks. 8.2 million barrels were stored last week in the U.S with oil inventories reaching 80-year record highs. The production of energy from U.S shale is having a major effect on the amount of oil used. Regarding the main U.S storage and swap facility in Cushing, Oklahoma, USA Today reports that, ‘80% of the region's 71 million barrels of storage space is occupied, up from 24% in October.’

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