Uncertain week ahead for oil prices as La Nina forms

11 July 2010 11 July 2010

BonTrade

It’s going to be an uncertain week ahead for oil prices as a new climate phenomenon named La Nina has developed in the Pacific and could have serious effects in the Gulf of Mexico later in 2010.

The WMO reports cool to neutral to weak La Nina conditions have developed in the tropical Pacific following the rapid dissipation of El Nino in early May. WMO says these conditions are likely to strengthen over the coming months, adding to extreme climate events in some parts of the world.

La Nina could exacerbate the problems that already exist in the Gulf of Mexico because of the massive oil spill which BP is still attempting to contain.

During a La Nina “more hurricanes form in the deep tropics from African easterly waves. These systems have a much greater likelihood of becoming major hurricanes, and of eventually threatening the US and Caribbean islands,” according to the centre, a part of the National Oceanic and Atmospheric Administration.

El Nino, the opposite phenomenon that warms the sea, dissipated in early May 2010 after prevailing since late 2009. This has led to a borderline weak La Nina event in the tropical Pacific. “These borderline conditions are more likely than not to strengthen to become a basin wide La Nina episode during the second half of 2010,” WMO said in a statement.

Oil prices closed the week’s trading session near $76 as markets bounced back, however with a new threat of poor weather conditions in the Gulf of Mexico due to the La Nina effect, prices could spike higher.