Crude oil prices started off the week with moderate changes; let’s examine the pressures from the demand and supply sides that might affect this market.
Here’s a short analysis of the crude oil market for today, June 22nd:
Crude oil prices – June 2011
On Tuesday, June 21st crude oil price (WTI) inclined by 0.15% to $93.40; during June (UTD) WTI spot oil shed 9.1% of its value.
Brent oil price, on the other hand, declined again by 0.56% to $111.15; during June Brent oil decreased by 5.1%.
The premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil continue to drop as it reached yesterday June 21st $17.75/b – the lowest level since June 9th; nonetheless, it rose by 22.58% during June.
Following the spike in the premium of Brent oil over WTI a few days back, the gap between Brent oil and WTI spot oil is closing, but it is still high.
Is OPEC output on the rise?
According to Bloomberg there is heavy speculation over this issue and there are those who think that several OPEC countries including Saudi Arabia may raise their output in an attempt to cool down the crude oil market and consequently bring down crude oil prices.
Following the last OPEC meeting, in which OPEC members couldn’t reach an agreement, the speculation around whether some members will raise their oil quota despite disagreement. During May, OPEC members didn’t raise their oil production quota compared with April, but the production of several members including Saudi Arabia did incline during the first quarter of 2011 compared with quarter 4, 2010. This was to compensate for the rapid drop in Libya’s crude oil production since February 2011. The recent decline in crude oil price might be related to the speculation around this issue. It’s still early to determine if Saudi Arabia is to raise its oil quota.
Petroleum stocks in the US
The US Energy Information Administration will publish today its weekly report on U.S. petroleum stocks: according to Bloomberg the U.S. oil stocks declined by 81 thousand barrels during last week. In the previous report, U.S. Petroleum and oil stocks moderately declined for the first time since April 15th; during last week the stocks fell 622 thousand barrels, or by 0.03% (See here the previous petroleum report).
China’s oil demand –a slowdown in growth rate
According to recent news, China’s crude oil demand during May reached 39.4 million mt, i.e. 9.31 million bbl/d; this was 8% above the y-2-y rate, but was moderately below the average oil demand during April 2011, which reached 9.37 million bbl/d. This recent drop might be also among the reasons for the reduced pressures on crude oil prices.
Current crude oil prices
Major crude oil prices are currently traded with mixed trend at the European markets:
The Nymex crude oil price, short term futures (July 2011 delivery) is traded at $93.52 / barrel, a $0.65/b decrease or 0.69%, as of 12:13*.
The Dated Brent spot oil price inclines by $0.25/b to $111.40 / barrel as of 12:13*.
(* GMT)
Thus, the current premium of Brent over WTI is at $17.88/b.
Crude Oil price outlook and analysis:
The concerns over Europe may affect not only the Euro, but also crude oil prices. Currently, the concerns over Greece have subsided for now.
There are factors to consider that may keep crude oil prices high including:
From the demand side, there is usually a rise in demand for crude oil due to seasonality effect (summer) – the recent news from China about its demand might curb some of this seasonality effect;
From the supply side, the speculation over OPEC’s oil production quota is still high and if Saudi Arabia will raise its oil production quota this might also bring down crude oil prices.
I still think that despite the recent drop in crude oil prices, they will continue to remain high in the mid term until the uncertainty around the demand and supply of crude oil will be resolved.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
Today
15:30 – EIA report about Crude oil inventories
17:30 – Decision on Federal Reverse’s Interest Rate
Tomorrow
13:30 – Department of Labor report – U.S. unemployment claims
15:00 – U.S. new home sales
15:30 – EIA report about Natural gas storage
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