Crude oil price forecast for 21 April 2011

Oil prices finished yesterday with high rises, after they haven’t shown much of change in the last couple of months. Let’s try and figure out what is installed for us today.

Here are main news items for today, April 21^s that might affect the crude oil market:

Crude oil prices during April

During April, up to April 20^th, WTI crude oil moderately inclined by 3.1%, while Brent oil rose by 4.5%. These figures are mostly affected by the price hike of WTI and BRENT oil from yesterday.

There is still high correlation between the daily percent changes of Brent oil and WTI spot price as seen in the chart below:

The Brazilian Connection

Notice of the chart below of the correlations of the daily percent changes between USD/BRL and oil prices (WTI and Brent): it shows that during April there has been a strong negative correlation between oil prices and the USD/BRL exchange rate. During April (so far) the correlations are at 0.881 for WTI oil and 0.665 for Brent oil. This might be just a correlation (after all correlation doesn’t imply causation), however it might also be that Brazil stepped up in its oil exports during last month.

Brazil is the largest oil producer in South America with over 2 million bbl/d in 2010 and has 12.9 billion bbl if proven oil reserves, the second largest oil reserves in South America (after Venezuela). During January 2011 Brazil exported to the U.S. 259 thousand of bbl/d – the tenth largest exporter to the U.S.

US Petroleum stocks declined last week

The EIA published yesterday its weekly report on petroleum stocks: According to its report, US petroleum stocks declined by 6.7 million barrels, which is a 0.38% drop compared to the previous week. For the week ending on April 15th the stocks reached 1,757.2 million barrels. (For the full petroleum report review and analysis, see here).

Libyan war – update

According to BBC, the rebels have managed to capture the Wazin crossing. The rebels currently control much of the eastern Libya.

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.

Nigerian riots

The recent reports from Nigeria are that at least 121 people were killed in violent riots following the Nigerian elections, in which Jonathan won and was re-elected as Nigeria’s president.

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 (it is the fourth largest exporter of crude oil to the U.S.).

Nigeria also recently managed to sell 70 bln naira in bonds to expire in three to five years.

Current crude oil prices

Major oil prices are currently traded in the US markets with moderate rises:

The Nymex crude oil price, short term futures (May 2011 delivery) is traded at 111.99 USD / barrel, a 0.54 USD/b increase or 0.48%, as of 13.16*.

The Dated Brent spot crude oil inclines by 0.32$/b and it is at 124.25 USD / barrel as of 13.27*.

(* GMT)

Thus, the current premium of Brent over WTI is at 12.26$/b.

Crude Oil price outlook and analysis:

Crude oil prices showed yesterday some major rises that broke the recent “no trend” pattern they were at in the last couple of weeks. This recent change might be related to some of the news listed above, however for now, oil prices continue with moderate rises as they did before yesterday.

Therefore I still speculate that WTI oil price will continue to increase moderately along with Brent oil, and might continue to slowly close the gap between the two prices. Furthermore, crude oil prices might remain at a high level, but in the mid to long term will eventually come down, once the uncertainty around the supply of oil will dissipate.

Difference between Brent oil and WTI spread: as of yesterday, April 20^th, the premium of Brent oil over WTI declined to 13.08$/b.

The premium of Brent oil over WTI started to drop in the last week after it had an upward trend at the first couple of weeks of April (as seen in the chart below). It’s still early to conclude if this recent decline will be the start of the closing of the gap between these two energy prices, however for now, I speculate that the premium might continue to moderately decline and range between 11 and 14 USD during the rest of the week.

Here is a reminder of the top events and reports that are planed for today (all times GMT):

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