5 News items to follow in understanding oil prices– November 24th

The crude oil prices are currently on the rise after it has been falling throughout this week. Here are 5 news items that you should consider in trying to understand the recent rise and have a better understanding in analyzing crude oil prices.

  • US’s economy is showing some recovery from the slow down it has been experiencing for the past couple of years. The data that support this claim is supported mainly by figures showing that jobless claims continue to fall while consumer spending and income are on the rise. These indicators are not a well defined proof that US economy passed its slump, however it does show that there is an improvement and that the US is on its road to recovery. As a result of this news, it is expected that crude oil prices will be on the rise, and this news could be the main factor that affected today’s crude oil prices and drove them up.
  • Ireland’s bailout is still one of the main hot news around, and will continue to be so in the next several weeks at least. For one thing, Brian Cowen, the current Prime Minister of Ireland along with the Irish government need to pass the country’s budget for next year. Further, Cowen is trying to reach an agreement with the European Union and the IMF on the 85 billion Euro aid package. As this issue will progress, the Euro/USD is expected to continue falling, the European belt weakening, and Ireland’s yields on its bonds rising as they are currently, according to Bloomberg, traded at 9.17%. This last item is due to investors slowly loosing their confidence in Ireland’s ability to recover its debt.  The effects this news could have on crude oil prices is a bit complex: on the one hand, there is a subtle effect as Ireland’s economy and the bailout of the European Union and the IMF could have a positive effect on crude oil prices as investors will consider trading their investments in Ireland’s bonds to crude oil.  On the other hand, if this crisis, which is currently only in Ireland, will spread to other countries in Europe, it could have a negative effect on one of the biggest economies in the World and could affect adversely Europe’s growth. This chain reaction could consequentially decline Europe’s consumption in crude oil, resulting in crude oil prices. As this story will progress, we will be able to see how exactly this crisis will affect the European economy and crude oil prices.
  • China’s attempts to slow down its economy, to fight inflation, resulting in China consuming less fuel. All a while its Central Bank is taking measures, such as China ordering banks to raise their monetary reserves, in order to continue slowing down its economy. Such a step means banks will hand out fewer loans. This step could consequently have an adverse effect on the crude oil prices, as China is one of the largest consumers of energy.
  • Tensions around the Middle East are on the rise as the political climate heats up in Lebanon around the upcoming publication of the investigation report over who assassinated the former Prime Minster of Lebanon – Rafic Al-Hariri in 2005. The report allegedly points a blaming finger on several Hezbollah members which, if true, could result in an internal war in Lebanon among rivaling groups. If there will be an escalation in Lebanon, it could adversely affect the entire region and if so, will consequently affect the stability in the Middle East and resulting in soaring crude oil prices. For now, Recep Tayyip Erdoğan – the Prime Minister of Turkey arrived to Lebanon in an attempt to cool down the region.
  • OPEC doesn’t expect crude oil prices to surpass the 80 USD per barrel mark, and therefore doesn’t expect to raise its quotas for the year 2011, i.e. even if there is a chance of consuming more crude oil, it won’t nudge OPEC to increase its supplies.

Prices:

Here is an update on the prices of main energy commodities for November 24th:

The crude oil price of short term futures (Nymex) – delivery for January 2011, as of 16.34PM GMT, on the New York Mercantile Exchange, is currently traded at 83.11USD per barrel, which represents a dollar 1.86 increase or a 2.29 % rise.

The Dated Brent spot crude oil reached 84.94 USD per barrel – a 2.5 per barrel rise as of 16.43PM GMT.

The WTI spot price is trading as of 14.06PM GMT at 80.93USD per barrel, a rise of 0.29% compare to the previous business day’s rate.

The Natural Gas prices (the Nymex Henry Hub Future) continues its fall which started yesterday, November 23rd, with a 0.23% fall, and is currently  traded at 4.22$ MMBTU (one million BTU) as of 16.34PM GMT, which is a 1.15% decrease or 0.05 drop in $ MMBTU.