The Petroleum stocks didn’t change much during last week, according to recent EIA report. The crude oil prices continue to zigzag with no clear trend and yesterday WTI spot and May delivery futures moderately inclined, while Brent oil moderately declined.
Today, there is an ECB meeting in which the European central bank might raise its interest rate for the first time in over two years; so what’s next for crude oil?
Let’s examine the main news for today, April 7th that might affect the crude oil markets.
Portugal assistance package
Portugal is expected to seek a recovery package from the European Central Bank; Portugal’s government will need to decide what kind of guarantees and collaterals it could offer in exchange for this assistance package; this assistance package is needed because it didn’t succeeded in reissuing its government bonds.
The current government bonds yield for 10 year notes has reached 8.51% and rose by 0.97 percent points compared to March 2011. As a comparison, Ireland’s bond yield is currently at 9.98%.
EC meeting – interest decision
Today there is a European Central Bank meeting in Frankfurt, Germany. There are expectations that ECB will come up with a decision to raise the Euro Area interest rate which is currently at 1% – the lowest level in the Euro Area history. The ECB held this interest rate level since June 2008. The main concern of ECB is that this low rate might have triggered the rising inflation rate in the Euro Area, which reached 2.6% in March 2011 in annual terms, nearly double the inflation rate during March 2010 (1.4%); and more than quadruple the rate in March 2009 (0.6%).
Libyan conflict – update
Libyan rebels retreated because of the heavy firing by Qaddafi’s troops from the central oil port of Brega. The rebels blame NATO troops for not doing enough to stop Qaddafi’s troops’ attacks.
NATO is still trying to end the Libya conflict between Qaddafi and the rebels by reaching diplomatic solution.
Petroleum stocks in the US
Yesterday, the EIA published its weekly report on petroleum and oil stocks: The report showed that US petroleum stocks didn’t change much this week and remained at 1,768 million barrels, however there was a moderate rise in U.S. Ending Stocks of Crude Oil of 0.2% or 1.9 million barrels– reaching 1,084 million barrels. (For the previous petroleum report, see here).
The chart below shows the petroleum and oil stocks levels compared to the WTI crude oil prices in 2010-2011.
In total, the report showed a rise in US production, imports and refineries inputs, and petroleum stocks remained unchanged.
The chart below presents petroleum and oil stocks levels compared to the WTI crude oil price in 2010-2011.
- The petroleum and oil stocks are near their level last year;
- WTI oil price is much higher today than the same time last year.
This is another confirmation that current WTI oil prices are not necessarily driven by shortage of oil rather than speculation around the future ramifications of the recent turmoil in the Middle East on the oil market.
Current crude oil prices
Major oil prices are traded in the US markets with moderate rises:
The Nymex crude oil price, short term futures (May 2011 delivery) is traded at 109.08 USD / barrel, a 0.25 USD/b increase or 0.23%, as of 16.49*.
The Dated Brent spot crude oil rises by 0.18$/b and it is at 122.12 USD / barrel as of 16.59*.
Thus, the current premium of Brent over WTI is at 13.4$/b.
Crude Oil price outlook and analysis:
Crude oil prices will continue to show little to no change as the day will progress, as the risk premium related to the turmoil in the Middle East is already incorporated into the oil market.
If the ECB will deicide to raise the Euro Area interest rate, this might affect not only the Euro currency, but also the commodities markets: in the short term it might steer traders towards Euro bonds away from oil futures, in the mid and long term this decision, all things being equal, might slow down the progress of the European economy and thus decrease the demand for crude oil.
I still think that oil prices are at a high level, and they will remain at their current price level in the short term and will continue to moderately fluctuate with no clear direction as they did in the past week.
Difference between Brent oil and WTI spread: Yesterday, April 6th, the gap between Brent oil and WTI reached 13.10$/b. This premium remained around the 10 and 15$/b in the past month as seen in the chart below. I still think that it will remain in the near future around this range.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13.30 – Department of Labor report – US unemployment claims
13.30 – ECB president’s speech
15.30 – EIA report about Natural gas storage
12.00PM – Canada unemployment rate report
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