Oil prices outlook – 23 February

The turmoil in Libya continues and affected crude oil price (WTI and Brent) as they soar in the last couple of days.

Let’s examine the recent activity in the energy market and analyze the effects of the recent news from the Middle East on crude oil price:

The protests in Libya enter its eight day calling for Muammar Qaddafi to step down of office and face charges for his crimes.

For now, Qaddafi continues to pose threats and use violence in an attempt to curb the protestors. There are official reports of nearly 300 people dead from the confrontations with the Army.  There were also reports that he will damage the oil reserves of Libya, and by doing so cutting the supply of oil to many countries in Europe. These threats, however, should be taken with caution as it could be just more of a ploy to put pressure on Europe to help in his cause.

Libya, a member in OPEC and holds the largest oil reserves in Africa with 44 billion barrels as of January 2010, is a major exporter of oil mainly to countries in Europe such as Italy, Germany and France.

Unlike Egypt, Libya is an important oil producer and a member of OPEC, and also unlike the outcome in Egypt, it seems that the battle of Qaddafi for his presidency won’t end as swiftly as it did for Mubarak.

Crude Oil price Outlook and Analysis:

As the uprise in Libya will continue, there will probably continue to be pressure for a rise in crude oil price and its volatility, however, since oil prices already rose very rapidly in the last couple of days, there will probably need to be a major news item to further push crude oil prices at a similar rate as it did on Monday/ Tuesday..

Notice that due to the US holiday – President’s day, the trade commenced only yesterday in the US, while in Europe the trade had started on Monday, causing for a lag between the reaction to the news from Libya and the effect it had on crude oil price in the US (WTI) and in Europe (Brent oil).

Also the price of oil continues to rise but much more moderately than at the beginning of the week.

Currently the Nymex crude oil price, short term futures (March 2011 delivery) is traded at 96.01 USD / barrel, a 0.59 USD/b rise or a 0.62%, as of 9.55 AM*.

The Dated Brent spot crude oil is at 106.74 USD / barrel – a 0.59 USD/ barrel decrease as of 10.06 AM.*

(* GMT)

There are also speculations that due to the uprise in Libya traders will lean towards WTI over Brent oil and this might shirk the spread between Brent and WTI.

Despite that the riots in Libya commenced over a week ago, the reaction in the energy markets showed a steep rise only this week. It could mean that people didn’t consider the protests in Libya as serious as they came out to be.

Last week the main characteristic of crude oil prices is the rise in their volatility: last week (14-18 Feb) the standard deviation of the daily percent change in Brent oil was 1.77%, compare to 0.67% a week earlier (7-11 Feb); WTI spot price’s standard deviation last week was 1.4% compare with 0.68% a week earlier.

Here is a reminder of the top news that will be published today that might influence oil and gas prices (all times GMT):


15.30PM – EIA report about Crude oil inventories


13.30PM – Department of Labor report – US unemployment claims

13.30PM – US Department of Commerce – Report on Durable Goods

15.30PM – EIA report about Natural gas storage

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