Crude oil price forecast for 4 April 2011

Crude oil prices started April with moderate rises; the main news from last week, including the ongoing war in Libya and the recent US Labor report had little to no affect on oil prices. Current oil prices are moderately rising. Let’s examine the main news for today, April 4th that might affect the crude oil markets.

US Labor Report

In the recent published US employment report the number of non-farm employees increased by 216,000.

Let’s make a very rough estimate on the number of jobs to be created  each month just to keep the current unemployment rate: the current annual population growth rate in the US is 0.97%, the labor participation rate (as of 2009) is 65%, and the US population within working age is 205 million people, this means that on average just to preserve the current unemployment rate, the added jobs during the year should reach 1.94 million (205*0.97%*65%) , or on a monthly scale an average 107,000 jobs. Since the labor report superseded this figure it means that the US economy did a bit better in order to decrease the unemployment rate.

This is a slight improvement in the US labor force’s condition. This may also indicate a rise in the demand for energy, especially in the manufacturing sector, as the US economy continues its progress. Nonetheless, the slight improvement should have affected much on the investors’ perspective on crude oil.

Middle East and North Africa – update

Libyan war- update

Upon the request of NATO, the US air force will continue to strike aircraft and fly combat missions over Libya until tomorrow.  NATO is still trying to end this war in Libya between Qaddafi and the rebels by reaching diplomatic solution. Diplomats from the U.K. were reported to head to the rebels’ city of Benghazi, to meet with rebels’ leaders.

Qaddafi’s troops continue their assault on Libyan cities, where the rebels reside.

There are still uprisings in Syria, Yemen and Bahrain (see here for the latest news about Syria).

OPEC output for March

There is speculation that the OPEC oil output declined during March, because of the decrease in Libyan production: the total production is expected to decline by 363,000 barrels, or 1.2%, to an average 29.022 million barrels a day during March, compared to February. In OPEC’s March report about February 2011, there was a drop in Libyan oil production during February of nearly 232 thousand bbl/d, from 1,579 thousand bbl/d in January to 1,347 thousand bbl/d in February. And yet the total OPEC production in February reached 30,016 thousand bbl/d a rise of 110.5 thousand bbl/d compared to January.

Japan’s energy imports

Japan is still recovering from the recent turmoil, and there are still concerns around the nuclear reactor in Fukushima (see here an analysis about Japan’s energy outlook).

During February, prior to the tsunami, Japan’s crude oil imports rose by 3.4% (compared to January), mostly from the Middle East (89.5%); Saudi Arabia was Japan’s biggest oil supplier. In March and April there will probably be an even higher rise in Japan’s oil imports, which might affect oil prices.

Current crude oil prices

Major oil prices started off the week in the European markets with moderate rises:

The Nymex crude oil price, short term futures (May 2011 delivery) is traded at 108.56 USD / barrel, a 0.62 USD/b increase or 0.57%, as of 8.04*.

The Dated Brent spot crude oil is at 118.89 USD / barrel – a 0.21 USD/ barrel increase as of 8.15*.

(* GMT)

Thus, the current premium of Brent over WTI is at 10.33$/b.

Crude Oil price outlook and analysis:

The recent rally of oil prices at the first day of April might be related to the expiry of the April futures. I still think that oil prices are high; and yet the oil market, mainly in Europe, is tight, partly due to the Libyan war. Further, Japan’s energy shortage will probably continue to affect the oil market and drive its prices up, but if so it will moderately raise the prices.

Difference between Brent oil and WTI spread: on Friday, April 1st, the premium of Brent over WTI remained in between 10 and 12$/b and reached 10.74$/b; I speculate that the premium will remain around the range of 10-12$/b.

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


2.30 – Australian trade of Balance


5.30 – Reserve Bank of Australia – rate statements


For further reading (in this site):