Stocks slumped last Friday in a month after AIG’s weak quarter revived worries about the credit crisis, and record oil and gas prices exacerbated fears about the threat of inflation. Stocks struggled at the open but then turned higher as world oil prices eased but remained above 125 dollars.
A variety of factors for the price spikes include rising energy demand from Asian powerhouse (China and India), a weak US dollar, inflow of investment funds, and militant attacks targeting oil company infrastructure in Nigeria, Africa’s largest crude producer.
Another factor is “stockpiling in China to prevent shortages ahead of the Olympics” in Beijing from August 8-24. China, will need a lot of crude oil to provide the facilities, transportation and energy supplies for a successful Games.
The Organisation of the Petroleum Exporting Countries (OPEC) cartel last week insisted the oil market was well-supplied and driven by speculators rather than by underlying demand.