Oil prices forecast – 15 March

The adverse effect of the tsunami attack on Japan continues as there are radioactive clouds might reach Tokyo due to winds blowing from the Nuclear Reactor in Fukushima. The Libyan riots progress and Saudi Arabia sent troops into Bahrain.

Let’s review the main news items that are related to the oil market and might affect crude oil price as of March 15th:

Japan’s tsunami attack

The news on adverse effects of the tsunami attack on Japan keeps on pouring in with reports of over 3,000 causalities due to this turmoil. Most the damage was caused in the Northeast of Japan.

The Nuclear Reactor in Fukushima, located 150 km north of Tokyo suffered a fourth explosion up to now, with a partial meltdown. There are radioactive leaks in the reactor, and the concern is that strong winds might bring the radioactive radiations to Tokyo – a city with over 13 million dwellers.

Japan is the third in usage of nuclear energy in the world and has 53 reactors that supply 34.5% of its energy usage. Japan has a plan to reach 50% of its electricity usage by nuclear energy by 2030.

The nuclear reactor in Fukushima, as many other reactors, isn’t designed to withstand strong earthquakes, because Japan started to develop its nuclear energy facilities 40 years ago at a time when the seismic activity was low.

Libyan riots update

As Qaddafi‘s air strikes continue to caused harm and damage throughout Libya in order to ward off the rebels’ advances, there are calls to enforce a no-fly zone over Libya so that Qaddafi‘s air strikes will discontinue.

The Arab League along with UK and France support the no-fly zone, to be enforced by the NATO if the UN will approve it, however the US shows some hesitation because it fears that this will likely to force attacks on the Libyan air force.

In the mean time the Libyan natural gas output keeps on plummeting with an estimated of 16.5 Bcf/d weren’t delivered since February 23rd to Italy – the largest importer of natural gas from Libya.

As of January 2011, Libya has 54.7 Tcf natural gas reserves, the fourth largest in Africa. In 2009, Libya exported 349 Bcf of natural gas to Europe.

Saudi Arabia sent troops to Bahrain

Yesterday it was reported that Saudi Arabia sent troops to Bahrain in an attempt to stabiles the region and to avoid an escalation into violent riots as in Libya. This unrest might flare up the energy market again, however if there won’t be any direct affects on oil production or reserves on other countries in the region this news might not have any sustainable effect on crude oil prices (Bahrain produces small amounts of oil compare to OPEC countries with estimated production of 40,000 barrels a day).

Current crude oil price

European markets currently start off with falls in major oil prices:

The Nymex crude oil price, short term futures (April 2011 delivery) is traded at 99.74 USD / barrel, a 1.45 USD/b decline or a 1.43%, as of 9.26*.

The Dated Brent spot crude oil is at 112.37 USD / barrel – a 1.12 USD/ barrel decrease as of 9.37*.

(* GMT)

 

Crude Oil price Outlook and Analysis:

If I would to speculate, the ongoing turmoil in the Far East mainly the ramifications of the tsunami attack on Japan will continue to occupy the news and affect the financial markets including the oil markets.

The effect of the Libyan riots has on crude oil prices continue to subside as other OPEC members pick up Libya’s oil production and increase theirs production, and by doing so reduce the pressure of oil prices to further rise.

I still speculate that crude oil prices will continue to drop as the day will progress.

The Brent oil and WTI spread: as of yesterday, March 14th the difference between Brent and WTI reached 12.3$/b; as the oil market in Europe continues to be tighter than in the US, the gap between the two commodities’ prices will probably continue to range around 11-12$/b.

EIA energy report

The EIA updated its energy report with an outlook for 2011: the report shows WTI spot oil price is estimated at 102$/b and 105$/b for refineries on a yearly average. These updated estimates are based on the assumption that the GDP in the US will grow by 3.3% in 2011 and the real GDP world growth (weighted by oil consumption) will be 3.8% in 2011.

Here is a reminder of the top news and reports that are planed for today and tomorrow that might influence the markets (all times GMT):

Today:

18.15PM – Decision on Federal Reverse’s Interest Rate

Tomorrow:

10:00AM– Euro Area core monthly inflation (February)

15.30PM – EIA report about Crude oil inventories

 

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