Crude oil price forecast for 15 April 2011

The oil prices continue to zigzag as WTI prices moderately increased yesterday, while Brent oil didn’t do much. Current oil prices are falling.

Let’s examine the oil market for today, April 15^th , including the G20 meeting today.

G20 Meeting

Following the G7 meeting from yesterday, today the G20 will convene today. The G20 comprise of the 20 leading countries such as United States, China, Canada and Japan. In the meeting these countries plan to talk about the economic ramifications of the tsunami disaster in Japan, the high oil prices and the growing debt concerns in several countries such as Britain.

Crude oil price during April

WTI oil price continued to fluctuate during April, and as of yesterday, April 14^th it rose by 0.5%; Brent oil price also rose by 3.4% during April.

Libyan conflict – update

Qaddafi remains adamant in warding off the rebel, as his troops have attacked Misrata, Libya’s third largest city where the rebels reside, as well as near the oil port of Brega.

The NATO air strikes didn’t stop the artillery assault of Qaddafi’ troops on the rebels dwellings. This brings the allies into a conundrum on how to end this feud between the rebels and Qaddafi. It seems that without a diplomatic approach the fighting will continue until the money will run out to one of the sides.

According to Bloomberg, the rebels are already seeking to borrow 2 billion USD. Part of their cash flow came from Qatar that purchased from the rebels crude oil, earlier this month.

Due to the decline the oil production of Libya, during March, OPEC oil supply fell by 0.89 mbl/d to reach 29.2 mbl/d, mainly because over 70% of Libya’s oil output declined; the oil production of non-OPEC countries rose by 0.2 mb/d to 53.3 mbl/d.

Current crude oil prices

Major oil prices are currently traded in the European markets with moderate falls:

The Nymex crude oil price, short term futures (May 2011 delivery) is traded at 107.66 USD / barrel, a 0.45 USD/b decrease or 0.42%, as of 10.34*.

The Dated Brent spot crude oil inclines by 0.56$/b and it is at 122.11 USD / barrel as of 10.45*.

(* GMT)

Thus, the current premium of Brent over WTI is at 14.45$/b.

Crude Oil price outlook and analysis:

The zigzag in oil prices in recent days shows that oil prices don’t have a clear trend; crude oil prices contain most of the high uncertainty in the oil market. I speculate crude oil prices will remain high in the short run, but at some point they will have to come down, as the uncertainty around the supply of oil will dissipate.

Difference between Brent oil and WTI spread: as of yesterday, April 14^th, the premium of Brent oil over WTI declined to 14.66$/b.

As presented in the chart above, the gap between Brent oil and WTI started to pick up at the beginning of the week, but by now has fallen to below the 15$ mark it was at during all of March and most of April. I speculate that the premium might to remain around the 14-16$ during the week.

Also notice there during April is a high positive correlation between Brent oil and WTI daily percent change of over 0.72. This indicates that at least most of the time they move in sync, which keeps their gap near the range they have been at for the past couple of months.

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

Today

All day – Meeting of G20

Tomorrow

All day – Meeting of IMF and World Bank

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