Crude oil prices start the week the same way they have ended the previous one – with falls. The Greek debt crisis is still likely to continue stirring the financial markets during the upcoming weeks and might even affect crude oil prices.
Here’s a short analysis of the crude oil market for today, June 27th:
Crude oil prices – June 2011
On Friday, June 24th crude oil price (WTI) very moderately inclined by 0.2% to $90.83/b; during June (UTD) WTI spot oil shed 11.6% of its value.
Brent oil price, on the other hand declined by 2.7% to $106.15/b; during June Brent oil decreased by 9.4%.
Is the premium of Brent oil over WTI spot oil closing?
The premium of Brent oil over WTI spot oil has started to decline in recent days after it had reached the highest level in months.
On Friday June 24th, the premium reached $15.32/b – the lowest level since June 3rd; nevertheless, it rose by 5.8% 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, perhaps due to the recent news from the IEA.
IEA to tap on to crude oil reserve
During last week IEA will release 60 million crude oil bbl from its strategic reserves in the upcoming month, in order to top off the shortage in crude oil supply caused by the current war in Libya.
Considering that the Libyan oil production fell from 1.6 million bbl/d during 2010 to nearly 0.2 million bbl/d during May 2011, this means that the 60 million bbl could fill Libya’s oil supply disruption of an average of 1.4 million bbl/d for nearly a month and a half.
This news is a short term solution and the only way the uncertainty around the current oil supply will be resolved is if OPEC will raise its crude oil quota.
The Euros to US dollar and crude oil prices
During April and May Euros to US dollar exchange rate was strongly correlated with crude oil prices. Despite the instability of this relation, during June 2011 this relation is still positive and strong, i.e. as the Euros/USD is dropping the crude oil prices are also declining.
This correlation shows that as the weak Euro and the strong US dollar might have also affected the recent decline in crude oil prices. As the news about the Greek debt will continue to pour in, so will the EUR/USD will change and might also affect crude oil prices.
Goldman Sachs says Libyan oil exports may rise
The war in Libya continue to progress and is far from over; there are event several updates in which Qaddafi doesn’t show any signs of backing down as he still thinks that he could survive longer than the NATO forces can stay in Libya. That being said, Goldman Sachs claims that Libyan oil exports might start to pick up and rise by 355,000 bbl/d from the rebellion’s side in the near future. If this will be the case, it could also help bring down the high crude oil prices.
Current crude oil prices
Major crude oil prices are currently traded down at the Asian markets:
The Nymex crude oil price, short term futures (July 2011 delivery) is traded at $90.08 / barrel, a $1.08/b decrease or 1.18%, as of 08:24*.
The Dated Brent spot oil price declines by $3.1/b to $103.05 / barrel as of 08:35*.
Thus, the current premium of Brent over WTI is at $12.97/b.
Crude Oil price outlook and analysis:
The Greek debt will continue to occupy throughout the week the financial news cycle and might keep the US dollar strong compared to the Euro; last week’s news about the Federal Reserve no signaling (for now) to issue a new stimulus along and thus bringing new wind for the US dollar to further rise is probably among the reasons for the crude oil prices to trade down.
The recent update of IEA releasing 60 million bbl of crude oil might also be a factor in brining down not only crude oil prices, but also the premium of Brent oil over WTI.
Don’t be confused, this is a short term solution and if OPEC’s oil production will not rise, crude oil price will start to pick up again.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13:30 – US Core PCE price index
13:30 – US personal spending
15:00 – US consumer confidence
For further reading: