Crude oil price forecast & Japan turmoil update - March 16

The turmoil in Japan continues as there were reports of an earthquake in Tokyo earlier this morning. There are also the explosions in the Nuclear Reactor in Fukushima.

Let’s review the main news items that are related to the oil market and might affect crude oil price as of March 16^th:

Japan’s turmoil update

The adverse ramifications from the tsunami attack keeps on befalling on Japan. Most the damage was caused in the Northeast of Japan.

Earlier this morning there were reports of a 6.0 Earthquake at the East coast of Japan, and people also felt the quake in Tokyo.

The Nuclear Reactor in Fukushima, located 240 km north of Tokyo suffered a fourth explosion, with a partial meltdown; however the recent news is that the radioactive levels in the region are falling.

Due to the sharp fall in the supply of energy in Japan, there are scheduled power falls in the electricity to cop up with energy shortage.

Libyan riots update

Qaddafi continues his assault on the rebels with air strikes. Now, it’s reported that he set his goal on Benghazi as his forces progressed into the gateway city of Ajdabiya, 100 miles from the rebel capital.

The rebels looked towards the implementation of the no-fly zone by NATO, however up to now there is no progress on this subject, as the UN didn’t approve it so far.

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 23^rd 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.

Bahrain riots update

The protests in Bahrain didn’t subside despite that Saudi Arabia sent there its troops in an attempt to stabiles the region. There are reports that the police opened fire on protestors in the village of Sitra yesterday; and there were additional violent confrontations between the police and protestors in the Capital of Bahrain – Manama.

As of yesterday, it seems that this news didn’t have much of an effect on crude oil prices, mainly since Bahrain isn’t a major oil producer as Libya is (Bahrain produces an estimated of 40,000 barrels a day). This might change, however, quickly if the riots will further escalate.

Petroleum stocks in the US

Today the EIA will publish its report on petroleum stocks: The current estimate around this report, according to Bloomberg, is that US crude oil stocks rose by 1.3 million barrels, compare to previous week. For the previous petroleum report, see here.

Current crude oil price

European markets currently start off with moderate rises in major oil prices:

The Nymex crude oil price, short term futures (April 2011 delivery) is traded at 97.95 USD / barrel, a 0.77 USD/b incline or 0.79%, as of 8.21*.

The Dated Brent spot crude oil is at 109.38 USD / barrel – a 1.58 USD/ barrel increase as of 8.31*.

(* GMT)

Crude Oil price Outlook and Analysis:

If I would to speculate, the turmoil in Japan will continue to occupy the news and to affect the financial markets including the oil markets; as in yesterday, if there won’t be other major news that might affect the oil market (e.g. news from the Middle East such as the Libyan riots update), then it will continue to be volatile as the uncertainty level rises. Nonetheless, the turmoil is in Tokyo – one of the financial capitals in the world and of the Far East, will likely be affecting the oil market as the trade volume drops substantially and increases the potential volatility in the markets.

I speculate that crude oil prices will continue to fluctuate throughout the day and in the end will moderately decline as the day will wind down.

The Brent oil and WTI spread: as of yesterday, March 15^th the difference between Brent and WTI reached 10.62$/b – the lowest level since March 8^th; the day before, it reached its highest level in over two weeks; This only shows how erratic the energy market behaves in the last couple of days. The gap between these commodities’ prices might continue to rise and fall as the week will progress, however I speculate that it will continue to range around 9-12$/b as the European oil market is tighter than the US market is.

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):

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