This Week In Energy: Oil Prices Hinge On Two Financial Crises
It has been an eventful week. Two major financial crises are destroying the bullish case for oil.
The Greek crisis continues, although there are signs that some semblance of a solution is at hand. Europe had demanded a new proposal and set this Sunday as the absolute final deadline, ruling out any further extensions. Greek Prime Minister Alexis Tsipras offered a new proposal to European creditors on its debt situation and appeared willing to accept most European demands in exchange for some debt relief.
Greece has asked for a three-year bailout, and will make further concessions on austerity, cutting spending in key areas of its economy. But in perhaps a surprise move, creditor nations are looking at offering some debt relief. The international pressure on Europe has grown, with calls to offer some debt relief to a country that is mired in five years of recession (or depression), has 25 percent unemployment, and cannot pay its bills. Even the European Council’s President, former Polish Prime Minister Donald Tusk, has joined international calls for debt relief, as part of a loan package. The German Chancellor has been adamantly opposed to debt relief, but with the White House leaning on Europe to act, further austerity in exchange for some debt relief offers all sides a face-saving way out of the crisis. That could pave the way for a financial lifeline to Greece, hours before a hypothetical Grexit from the Eurozone.
Related: OPEC Still Holds All The Cards In Oil Price Game
Meanwhile, Greece announced a 2 billion euro plan with Russia over the Turkish Stream Pipeline, a natural gas pipeline that would run beneath the Black Sea, carrying Russian gas to Europe. Greece’s energy minister announced preliminary plans for the project on July 8, just as Greece was entering into the final days of its standoff with Europe over its debt mess.
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