Let’s review the main news items that are related to the oil market and might affect crude oil price as of March 22nd:
Allies’ attack in Libya attack update
The attack of allied forces progresses to its fourth day, as the armed forces strike Qaddafi’s air force in order to enforce the UN’s decision of a no-fly zone over Libya.
The voices that criticize this operation come from China and Russia; according to recent reports, Russia is planning to discuss UN security meeting.
There are also calls made by western oil companies operating in Libya that they fear the potential nationalization of their operations in Libya by Qaddafi.
Japan’s turmoil update
The Nuclear Reactor in Fukushima is still a prime concern of the high radiations levels in the vicinity of Fukushima. And yet the financial markets in Tokyo seem to rally with rises registered in the Nikkei.
Japanese officials state that the number of missing or dead could rise to well over 21,000.
In regards to energy, because of the tsunami and earthquake that followed, Japan reduced its demand for oil imports from Europe as many of its refineries were damaged in the tsunami. If this condition will continue, it could ease the pressure on oil prices from rising and might even reduce the premium of Brent oil over WTI (see below).
In the mean time, there are claims that Japan will get emergency liquefied natural gas from Malaysia’s state-owned oil company Petronas (For more on the considerations about recovery of Japan see here).
Unrest in Syria
The Middle East keeps on producing news, this time from Syria, as there are reports of protests against the current regime of Bashar Assad – the ruler of Syria. Israel is keeping close tabs on the developments in Syria because this situation could escalate very quickly. This news doesn’t have any direct affect on the oil market however it could adversely affect the stability in the Middle East.
Yemen protests – update
Yesterday, thousands of protestors spent the night in the streets and continued calling for the resignation of President Ali Abdullah Saleh and the implementations of reforms in his regime. The protests don’t seem to subside up to now.
Yemen is an oil producer of 0.26 million barrels per day during 2010 and with proven reserves of 3 billion barrels as of January 2011.
Current crude oil price
European markets currently start off with moderate falls in major oil prices:
The Nymex crude oil price, short term futures (April 2011 delivery) is traded at 101.94 USD / barrel, a 0.39 USD/b decline or 0.38%, as of 8.03*.
The Dated Brent spot crude oil is at 115.17 USD / barrel – a 0.05 USD/ barrel decrease as of 9.13*.
Crude Oil price Outlook and Analysis:
Despite the ongoing turmoil in Libya, it seems that the “Libyan effect” on crude oil prices start to subside as oil prices already incorporated the uncertainty that rose from this region. As the week will progress we will see if any further escalation that might arise in Libya will affect energy prices. I speculate that for now there won’t be any further rapid price hikes and crude oil prices will moderately change with no clear trend as the day will progress.
The Brent oil and WTI spread: as of yesterday, March 21st the difference between Brent and WTI reached 12.09$/b; I speculate that the spread will continue to range around 10-14$/b as it did during the month of March as seen in the graph below.
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):
13.30 – Core retails sales Canada (January 2011)
15.30 – EIA report about Crude oil inventories
18.00 – Chairman of Fed – Ben Bernanke’s speech
For further reading (in this site):
- Weekly outlook for 21-25 March
- The erratic behavior of oil prices – Weekly recap 14-18 March
- Japan’s turmoil aftermath – preliminary outlook