Oil prices outlook – 21 February

Crude oil price (WTI) starts off the week with rises, despite the recent downward trend the WTI price had experienced during 2011. Let’s examine this energy commodity behavior of WTI and Brent oil:

The two main news items that might have an effect on crude oil price is the news from the Middle East and the news from China:

The most interesting news is related to the current Middle East turmoil and in particular the uprising in Libya. After the uprise in Tunisia and Egypt, the Libyan people also seek change in their current governing   president Muammar Qaddafi. Up to now the six days of protests cost the lives of hundreds of people due to the conflicts of the protestors with the army.  There are rumors that Qaddafi has fled Libya to South America, a rumor that his son refuted in the news.

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.

Therefore, unlike the uprise in Egypt in which the main concern from commodities’ perspective was the Suez Canal, the current situation in Libya could have adverse effects on its main consumers of oil listed above; if there will be any impediments in exporting oil.

Note that there are also still calls for change in Bahrain and Yemen. Therefore, the entire region is still unstable.

A related news item to the Middle East is the Iranian two warships that are scheduled to sail via Suez Canal en route to Syria (its unclear if they had passed already or not). These ships might pose a threat on Israel and could further drive up the uncertainty in the Middle East along with the tension in the entire region.

The second news item is related to the recent rises in China’s retail gasoline for the first time in 2011. China rose its gasoline prices because of Brent oil had recently passed the 100$/b mark in London. This recent rise will probably incline the inflation in China. This recent rise might curb the growing consumption in oil.

Crude Oil price Outlook:

All the Middle East news, if they will have any effect on the behavior of traders and investors in crude oil, will probably help further drive prices of oil up in the short term, however long or mid term effect doesn’t seem feasible for now.

Recall that during the month of February, WTI spot prices declined by 3.7%, while Brent spot increased by 1.8%. This shows, at least for WTI, that despite all the turmoil in the Middle East, the WTI didn’t rise and Brent oil increased only moderately.

For now crude oil price show moderate rises: the Nymex crude oil price, short term futures (March 2011 delivery) is traded at 87.38 USD / barrel, a 1.18 USD/b rise or a 1.37% fall, as of 7.00 AM.

The Dated Brent spot crude oil is at 103.82 USD / barrel – a 1.3 USD/ barrel increase as of 7.00 AM.*

(* GMT)

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

On the news today:

08.00AM – Manufacturing PMI French

08.30AM – Manufacturing PMI German

09.00AM – Manufacturing PMI Europe


23.50PM – Report of Japanese Trade balance (for January)

For further reading (in this site):