As the markets wind down for the week, oil is dropping once again and is sitting comfortably around $116. A stronger dollar as well as further confidence regarding weakened demand were the primary catalysts.
Interestingly, the increasingly volatile military conflict between the Republic of Georgia (a major energy transit route) and Russia over the breakaway province of South Ossetia in Georgia did not weigh that heavily on traders today (CNBC):
“In other circumstances, you might have expected it to push oil up $5,” said John Kemp, economist at RBS Sempra.
“I think it’s an indication of how bearish the underlying sentiment is right now (that it hasn’t).”
While this potential war has not significantly impacted the oil markets, it’s an important reminder that $200 oil could only be one Middle Eastern war away.
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