Oil prices forecast – 17 March

The unease in Japan progresses as there are growing concerns for a nuclear disaster due to the rising pressure in cores of 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 17th:

Japan’s turmoil update

The adverse affects from the tsunami attack from Friday and the recent earthquake at the East coast of Japan keeps on coming. The main concern now is with the Nuclear Reactor in Fukushima as there are concerns for a meltdown as the pressure in the core reactors keeps on rising. The Japanese used helicopters to pour water over the reactors in an attempt to cool them down.

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

Libyan riots update

Qaddafi continues his air assault on the rebels, as his warplanes bombed the Benghazi airport.  Qaddafi’s troops still meet resistance around Ajdabiya a city 100 miles from Benghazi, the rebel capital. The UN Security Council will debate on taking actions against Qaddafi’s air assault and perhaps implementing a no-fly zone by NATO, however up to now there is no progress on this subject.

According to the recent International Energy Agency monthly report on oil markets for February 2011, OPEC’s oil output fell by 95,000 b/d to reach 30.05 mb/d. Nearly 200,000 b/d was lost due to the Libyan turmoil, but was partly offset by higher production from Gulf States. The oil supply worldwide increased to 89 mb/d in February (all time high).

Bahrain riots update

The unrest in Bahrain continues as yesterday six activities were arrested by the security forces. There were reports in the last few days of violent confrontations between the police and protestors in the Capital of Bahrain – Manama.

Bahrain produces an estimated of 40,000 barrels a day and has proven reserves of 0.12 billion barrels as of January 2011.

 

Yemen riots

Yemen, another oil producer with proven reserves of 3 billion barrels as of January 2011, is reaching the headlines as there are reported protests against the current regime and President Ali Abdullah Saleh. There are reports of violent clashes between hundreds of protestors and security forces in Sana – Yemen’s capital.

Petroleum stocks in the US

Yesterday, the EIA published its report on petroleum stocks: the US crude oil stocks fell by 5.1 million barrels, compare to previous week. For the complete 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 98.9 USD / barrel, a 0.92 USD/b incline or 0.94%, as of 9.27*.

The Dated Brent spot crude oil is at 111.54 USD / barrel – a 1.38 USD/ barrel increase as of 9.37*.

(* GMT)

Crude Oil price Outlook and Analysis:

If I would to speculate, as the turmoil in Japan continues to occupy the news and to affect the financial markets, it will probably continue to add uncertainty to the oil markets, resulting in high fluctuations as we have seen in the last several days.

In the long run, Japan will need to look towards alternative energy sources as 11 of its nuclear power reactors were damaged along with five of its oil refineries.

Japan is the world third in usage of nuclear energy and has 53 reactors that supply 34.5% of its energy usage. Since oil prices are high, it might be that Japan will look towards using natural gas.

The Middle East news might be taking the back seat in the headline for the Japan nuclear peril news, however it doesn’t mean that the region has stabilized or doesn’t have the potential to adversely affect the oil market. It could be that the news from Yemen and Bahrain, despite their small role in the world’s oil production, affects oil traders and might be partly responsible for the recent rally in oil prices.

In the short term in times of uncertainty the market changes rapidly with no clear direction, however I speculate that crude oil prices will continue to fluctuate throughout the day and in the end will moderately incline.

The Brent oil and WTI spread: as of yesterday, March 16th the difference between Brent and WTI reached 12.18$/b – the highest level since this week; the day before, it reached its lowest level in over a week; this shows how erratic and unstable the energy market behaves in the last few days. I speculate that it will continue to range around 9-12$/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):

Today:

13.30PM – Department of Labor report – US unemployment claims

13.30PM – Report on US CPI

15.30PM – EIA report about Natural gas storage

Tomorrow:

9.00AM – Euro area balance of payments

10.00AM – Euro area trade of balance

 

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