Crude oil rose above $66 a barrel last week, closing at its six-month high, on concerns about Iran's geopolitical tensions, which increases the likelihood of a disruption of shipments from the Persian Gulf.
Iran ranks as the world's fourth-largest oil producer behind Russia, Saudi Arabia, and the United States.
Iran also has the world's second-largest reserves of natural gas, behind Russia.
However, the United States gets less than 20 % of its oil from the Mideast, and has an embargo on all Iranian oil.
So why do events in the Middle East have such an impact on US oil prices? With worldwide demand for oil running high, and supplies barely able to keep up, an interruption of Iranian exports has investors nervous.
Experts claim that Iran needs to export oil just as badly as the world needs to buy it, making a complete shutdown unlikely.
Nevertheless, traders fear the country could use oil as a weapon, withholding it in retaliation for sanctions or a military strike on its nuclear program.
In addition, the summer driving season is coming and the market is speculating on whether we will have adequate gasoline supply.
However, many believe that the gasoline supply is sufficient and the real reason behind the higher prices is that there is lots of cash or liquidity in the financial systems, and investors simply just want to buy securities that could over-perform, which have lately been the gas and crude stocks.
Many traders think that the price of oil goes even higher once the commodity-contract passes the psychological level of $65.
Once the price goes above $65 many prearranged stop buy orders were triggered.
Investors use a buy stop hoping to gain momentum if the price reaches a particular level.
Stop buy orders
If the price exceeds the level indicated ($65 for example), it will automatically trigger a market order and will be executed at the best price immediately obtainable.
When so many "stop buy orders" are triggered, it pushes the oil price even higher on heavier temporary buying pressure.
Generalizing, we could say that non-commodity companies traded on the market have an indirect relation to oil prices.
When oil prices increase, corporate profits suffer (if we assume all other factors remain unchanged), because companies must pay more for their energy use.
In addition, higher oil prices dampen consumer confidence, which could consequently lead to decreased sales and lower company profits. But, although higher prices are bad for corporations, emerging markets like the Budapest bourse could, theoretically, benefit from higher oil prices.
Hedge funds had a large influence, because they continued buying energy shares in order to satisfy their need for higher risk emerging assets.
If Hungary's regional neighbors like Russia perform well, it is expected that the Budapest Stock Exchange (BSE) will also benefit.
The price of MOL, the largest Hungarian oil and gas refiner, rallied last week on higher price gains from oil and gas companies in the US and Russia.
Its most significant trading session was last Friday (Mar 30), when it closed 3.5% higher on the day, and it continued recording gains for this week on still high oil prices.
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