Crude oil prices continue to moderately changed, but during recent days there has been an upward trend in the difference between Brent oil and WTI oil spot prices. Will this trend continue? Let’s review and analyze the crude oil market for today, June 14th:
Crude oil prices – June 2011
Yesterday, June 13th, crude oil price (WTI) declined to $97.30 – a 2% decrease; during June (UTD) the WTI spot oil decreased by 5.26%.
Brent oil price on the other hand moderately increased by 0.08%, and it reached $118.30; during June Brent oil inclined by 0.96%.
The difference between Brent oil and WTI spot oil is on the rise
The premium of Brent oil over WTI rose by 45.03% during June as it reached on Monday, June 13th $21/b – the highest gap since February 21st 2011.
As seen in the chart below, the difference between Brent oil and WTI started to pick up in recent days and reached the highest level in over three months.
The last time there was such an upward trend was back in –January-February when the turmoil in the Middle East commenced in Egypt and then Libya.
There was also a rise in the variance in the gap between Brent oil and WTI.
These findings might indicate that European crude oil market where Brent oil is consumed (among other continents) is further tightening compared with the US oil market.
Following the OPEC meeting, in which the members couldn’t reach a consensus on the oil production quota, there are some hints that Saudi Arabia will raise its oil production despite lack of agreement in OPEC. If Saudi Arabia will follow-through on this “threat”, this might ease the gains in crude oil prices.
BOJ kept monetary policy and expand lending program
BOJ decided to expand its lending program by ¥500 billion ($6.25 billion), after its previous ¥3 trillion (roughly $37.5 billion) lending program for private banks dating back to June 2010 is about to reach its cap.
Bank of Japan board also decided earlier today to keep the overnight interest rate at the same level of 0%-0.1%.
Japan is among the leading countries in importing crude oil and natural gas, and this stimulus plan could help the Japanese economy to further grow and perhaps even raise the demand for energy commodities, especially as the recent tsunami and earthquakes damaged several of its nuclear plants – one of Japan’s former prime energy sources.
US Producer price index
Today, the US PPI will be published and it shows the changes in the prices of sellers and producers of goods and services. During April this index inclined by 0.8%; if this index will further rise, it might indicate a rising inflation pressures in the U.S.
Texas Drought threaten oil production
There is a report by Bloomberg that Texas is suffering the worst drought it had in over 116 years; this drought might jeopardize the oil production in the Texas – the leading US state in oil and gas production. The water supply is imperative for fracking and extracting crude oil and natural gas.
China’s industrial production slowed down
According to recent report, China’s industrial production index has moderately declined by 0.1 percent points during May compared with April 2011 (see here for further information on this matter).
This news might indicate that there is slowdown in the growth rate of China’s economy and consequently might indicate a slowdown in the growth in China’s demand for major energy commodities including natural gas and crude oil.
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 $97.05 / barrel, a $0.25/b decrease or 0.26%, as of 13:20*.
The Dated Brent spot oil price inclines by $1.15/b and it is at $119.46 / barrel as of 13:31*.
Thus, the current premium of Brent over WTI is at $22.41/b.
Crude Oil price outlook and analysis:
From the supply side, since OPEC didn’t reach an agreement this might keep crude oil prices high and might even push them up.
From the demand side, the recent economic indicators show that U.S, Japan and China aren’t advancing as they did earlier this year. This might ease the advances of crude oil prices.
Therefore, in the short term, these forces that push crude oil prices in opposite directions may keep them at their current level of $100 per barrel for WTI and $117 for Brent oil. But the rising gap between Brent oil and WTI oil might indicate that the European oil market is further tightening and may even suffer more from the oil shortage from Libya than US oil market does.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13.30 – U.S. producer price index news
15.30 – EIA report about Crude oil inventories
For further reading: