Oil prices continue to zigzag with no clear trend as WTI spot oil moderately inclined yesterday, while Brent oil moderately inclined. It seems as if the market is waiting for breaking news to affect the direction of oil prices.
Let’s examine the main news for today, April 20th that might affect the crude oil market:
Crude oil prices during April
During April, up to April 19th, WTI crude oil moderately inclined by 0.6%, while Brent oil rose by 2.5%.
As seen in the chart below, the current correlations of the daily percent changes between EURO/USD and oil prices (WTI and Brent) are high and are at 0.461 for WTI oil and 0.254 for Brent oil. In the previous months there was a low correlation but it has rising since the beginning of the year. This shows that during April more than in recent months, oil prices are correlated with EUR/USD and the depreciation of the USD has a relation with the rising oil prices.
Petroleum stocks in the US
The EIA will publish today its weekly report on petroleum stocks: According to Bloomberg the expectations are that US crude oil stocks rose by 667 thousand barrels. In the previous report, US petroleum declined by 4.9 million barrels, which is a 0.28% drop compared to the previous week. The stocks reached by April 8th 1,763.9 million barrels. This was the largest (For the previous petroleum report, see here).
OPEC monthly Report
OPEC raised its 2011 estimates for 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
NATO claims there is a limit to its ability to stop Qaddafi’s forces.
In the mean time to help the rebels finance their fight, the Italian government, one of the prime importers of Libyan oil has helped the rebels to sell oil and comply with the existing treaties with Italy.
According to EIA, nearly 80% of Libya’s 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 was once at 1.6 million barrels per day before the Libyan war began back in February 2011; since then it has declined by nearly 1.3 million bbl/d.
Following the Nigerian elections, in which Jonathan won and was re-elected as Nigeria’s president. There are reports of violent riots that broke in the northern states of Nigeria.
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.
Current crude oil prices
Major oil prices are currently traded in the European markets with moderate rises:
The Nymex crude oil price, short term futures (May 2011 delivery) is traded at 109.35 USD / barrel, a 1.07 USD/b increase or 0.99%, as of 8.57*.
The Dated Brent spot crude oil inclines by 0.62$/b and it is at 122.19 USD / barrel as of 09.07*.
Thus, the current premium of Brent over WTI is at 12.84$/b.
Crude Oil price outlook and analysis:
Crude oil prices keep on showing a “no trend” pattern: the WTI spot oil price moved during April (up to date) between 105.75 and 112.27 USD, a 6.52$/b range; WTI spot oil variance is 2.615 during April, compared with 6.542 during the first couple of weeks of March. These data show that oil prices have slowed down with their changes and the recent news from the Middle East doesn’t have much of an effect on oil prices as they did during previous months.
I speculate crude oil prices will remain at a high level, but will start to come down, as the uncertainty around the supply of oil will dissipate.
Difference between Brent oil and WTI spread: as of Tuesday, April 19th, the premium of Brent oil over WTI declined to 13.42$/b.
The premium of Brent oil over WTI had an upward trend during April, even though the premium settled in the last few days around 14-16$. I speculate that the premium might moderately decline and range between 12 and 15 USD during the week.
The variance of this premium has reached 2.52 during April, which is higher than during March 2011, however lower than February and January 2011.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
9.30 Bank of England MPC meeting
15.30 – EIA report about Crude oil inventories
13.30 – Department of Labor report – US unemployment claims
15.30 – EIA report about Natural gas storage
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