Oil prices witnessed a southward movement on Wednesday because of two reasons. First of all, Saudi Arabia has urged to pump more oil to cover the supply shortages and secondly, some signs are showing the slowing down of the Chinese economy. Oil has already risen more than 9% in the current year. The main reason is the fact that Iran threatened to disrupt oil services in the Middle East as US and other European countries imposed sanctions against them for carrying out the nuclear program.
The price of US crude oil fell by $2.48 and went down to $105.61 per barrel in New York while Bent crude went down by $1.59 and touched $124.12 in the London market. Saudi Arabia said that they have got the capacity of producing 10 million barrels per day and they can very easily raise it to 12.5 million barrels a day. A statement provided by the Saudi government has stated that “to provide adequate supplies of petroleum stabilize oil markets and return oil prices to fair levels for producers, consumers and the oil industry.”
Iran can export more than 2 million barrels in a single day. Due to the imposed sanctions, it has become tougher for Iran to sell their oil. In protest, Iran has threatened to block the movement of ships carrying oil through the Strait of Hormouz. It has been found that about one fifth of the oil supplies of the world pass through this Strait.
Ruler of Kuwait has also said that he has spoken to the Iran authorities and they have been assured that the path will not be blocked and they will allow safe passage of oil shipments. Analysts say that this is one of the reasons for decline in oil prices at the international level.
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