Crude oil prices started the week the same way they have ended the previous week, with moderate falls; the upcoming OPEC meeting in which OPEC will set up its oil production in 2011 might affect the future oil prices. Let’s examine the crude oil market for today, June 7th:
Crude oil prices – June 2011
Yesterday, June 6th, crude oil price (WTI) declined to $99.01 – a 1.52% decrease; during June so far the WTI spot oil decreased by 3.6%.
Brent oil price also decreased by 1.62% as it reached $114.02; during June Brent oil declined by 2.7%.
Following the rapid fall of crude oil prices at the first week of May, they have remained nearly unchanged during most of May and June up to date.
The premium of Brent oil over WTI didn’t change much and reached on Monday, June 6th $15.01/b.
The chart below presents the changes of this premium during May and June 2011. Despite the rapid changes during May, this premium remained around the $13 to $16 during recent weeks.
Yesterday, June 6th, the US dollar strengthened against major currencies, including the Canadian dollar and the EURO by 0.32% and 0.40%, respectively.
These changes coincide with the decline in crude oil prices yesterday.
If the US dollar will continue to strengthen against these currencies, this might further push down crude oil prices.
OPEC meeting on June 8th and the Libyan angle
The upcoming OPEC meeting on June 8th, in Vienna Austria will be a very intense one because it seems that OPEC will side the opposition to Libyan’s ruler Muammar Qaddafi. The meeting will revolve around whether or not OPEC will raise its reported oil production.
Due to the tight crude oil market, oil prices inclined very sharply in 2011; some of the reasons include the rise in global demand for crude oil and the decline of OPEC’s crude oil output in recent months due to the decline in Libyan oil production; therefore, Saudi Arabia is pushing to raise OPEC’s production; According to Bloomberg Saudi Arabia will increase its oil production by 10% during this month. On the other hand, currently, Iran and Venezuela are among the leading opposing countries for raising OPEC’s oil production quota.
World news – oil markets
Ben’s speech- the Chairman of the Federal Reserve is set to speak today on the U.S. economy’s economic outlook. Following the recent publications of the economic indicators (PMI, Labor report GDP etc) showing the U.S. economy isn’t recovering from its slowdown, it will be interesting to see what will Bernanke say, and whether he will tip his hand as to what is next for the Fed once the recent quantitative easing plan will end this month.
The U.S. EIA’s oil outlook to be published this week may correct downward its outlook on the global oil demand in 2011 and 2012; this report might affect the decision to raise the oil output in the upcoming OPEC meeting.
Current crude oil prices
Major crude oil prices are currently traded with moderate falls at the European markets:
The Nymex crude oil price, short term futures (July 2011 delivery) is traded at $98.47 / barrel, a $0.54/b drop or 0.55%, as of 12:43*.
The Dated Brent spot oil price declines by $0.03/b and it is at $113.99 / barrel as of 12:55*.
Thus, the current premium of Brent over WTI is at $15.52/b.
Crude Oil price outlook and analysis:
Crude oil prices continue to demonstrate moderate changes as the financial markets are still seeking direction for crude oil prices.
As stated above the upcoming OPEC meeting that will produce a decision as to whether OPEC is to raise its crude oil production for 2011, could affect the direction of crude oil prices. If OPEC will decide to raise its oil production by a substantial rate, this could push down oil prices.
The recent disappointing macro economic reports about the US economy (e.g. labor report, PMI etc) indicate that US economy is still struggling and this could indicate a drop in oil demand in US for the rest of 2011. On the other hand, these reports might also drive the Fed to come up with a new stimulus plan that could devalue US dollar and consequently push oil prices up.
In the mean time, I still speculate that in the short term crude oil prices will remain at their current high prices around $100 per barrel for WTI and $115 for Brent oil.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
5:30 – Reserve Bank of Australia – rate statements
14:00 – Ben Bernanke, Chairman of Fed, speaks
15.30 – EIA report about Crude oil inventories
For further reading:
- Weekly outlook for June 6 – 10
- Oil prices started June with little changes – Weekly recap 31 May- 3 June