Oil prices started off with falls despite the ongoing turmoil in Libya and the recent elections in Nigeria. For now it seems that these news items don’t have much of an effect on oil traders as oil prices keep on falling for now.
Let’s examine the main news for today, April 19th that might affect the crude oil markets:
Bloomberg reported that in the recent Nigerian elections, Jonathan won and was re-elected as Nigeria’s president. There are some reports of violent protests against his reelection.
The stability of Nigeria to U.S. is imperative, because of its important role as crude oil exporter to the U.S.
Nigeria is one of the leading OPEC countries in exporting crude oil to the U.S. with over 31,220 thousands of barrels during January 2011.
During 2009, Nigeria’s oil production reached nearly 2.2 million bbl/d out of which 36% was exported to the U.S. As of January 2010, Nigeria had an estimated 37.2 billion bbl oil reserves.
Crude oil price during April
During April, up to April 18th, WTI crude oil it moderately declined by 0.4%, while Brent oil rose by 3.0%.
OPEC monthly Report
OPEC has moderately raised its estimates for the 2011 worldwide crude oil demand from 87.8 million bbl/d to 87.9 million bbl/d, and thus the demand is estimated to increase by 1.4 million bbl/d in 2011 compared to 2010.
Libyan war – update
The UN has reached an agreement with Qaddafi to provide supplies to the rebels in Misrata, however the UN has yet to reach a cease fire agreement between Qaddafi’s regime and the rebels.
According to EIA, As of January 2011, Libya’s total proven oil reserves reached 46.4 billion barrels, which are largest reserves in Africa. Nearly 80% of its proven oil reserves are located in the Sirte basin. During Jan-Nov 2010, Libya exported over 1.5 million bbl/d during that time, out of which nearly 85% was directed to the European market: Italy (28%), France (15%) and Germany (10%).
Libya’s oil production, which was set at 1.6 million barrels per day during January 2011, fell by over 70% since the riots had begun in February 2011.
Iran’s oil drilling in Caspian Sea
According to PRESS TV Iran is to complete its first oil exploration drilling in the Caspian Sea by March 2012. It is estimated that the Caspian Sea holds between 17 and 33 billion bbl of crude oil, and over 8,000 Bcf of natural gas. Once this drilling will be completed it will enable Iran, one of the world’s largest oil producers and second largest among OPEC countries.
Current crude oil prices
Major oil prices are currently traded in the European markets with falls:
The Nymex crude oil price, short term futures (May 2011 delivery) is traded at 105.82 USD / barrel, a 1.3 USD/b decrease or 1.21%, as of 9.49*.
The Dated Brent spot crude oil declines by 1.8$/b and it is at 120.38 USD / barrel as of 10.01*.
Thus, the current premium of Brent over WTI is at 14.56$/b.
Crude Oil price outlook and analysis:
The week started off with moderate falls that also continued today. The news from the Middle East including Libya and Nigeria doesn’t seem to have much of an effect on oil prices in pushing them up.
It could be that the recent increase in reserve requirement ratio (RRR) for large lenders in China, might have affected traders in the anticipation that this might curb the growth of China’s economy and consequentially affect its demand for crude oil. I speculate crude oil prices will remain at a high level, but will start to come down, as the uncertainty around the supply of oil will dissipate.
Difference between Brent oil and WTI spread: as of yesterday, April 18th, the premium of Brent oil over WTI declined to 15.07$/b.
As presented in the chart below, the gap between Brent oil and WTI has an upward trend during April, even though the premium settled in the last few days around 14-16$. I speculate that the premium will remain around the 14-16$ during the week.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13.00 – Canadian Core CPI
9.30 Bank of England MPC meeting
15.30 – EIA report about Crude oil inventories
For further reading (in this site):
- Oil prices remained unchanged – Weekly recap 11-15 April
- Weekly outlook for April 18-22
- Petroleum stocks beat expectations and declined – April 13