Oil prices forecast – 23 March

The allied forces led by US army progress with their attack Qaddafi’s   army, now there are reports that they progress to the Qaddafi’s ground forces after their initial attack consternated on the Libyan air force.

Yesterday major energy prices including crude oil prices and natural gas prices rose. There is speculation from where Japan will compensate its shortage in energy.

Let’s review the main news items that are related to the oil market and might affect crude oil price as of March 23rd:

Allies’ attack in Libya attack update

The allied forces continue their attack on Qaddafi’s army and progress to fifth day of fighting, as they currently attacking Qaddafi’s ground forces after their initial attack on the Libyan air force.

China and Russia continue to criticize this operation and according to recent reports, Russia is planning to discuss this issue in an upcoming 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 aftermath

The recent news from the nuclear reactor in Fukushima is that there is some progress in containing the cores however it is still far from over and there are reports of high radiations levels in the vicinity of Fukushima.

Japanese officials state that the number of dead has risen to over 9,000 and missing people are at over 14,000 so that the total is over 23,000 missing or dead.

The main speculation is around the aftermath of Japan, as Japan will start to look for quick energy sources to compensate for its drop in energy production due to the tsunami attack, which shut many of its nuclear power plants and damaged many oil refineries.  Japan is the world third in usage of nuclear energy and has 53 reactors that supply 34.5% of its energy usage. In the recent tsunami 11 of its nuclear power reactors were damaged along with five of its oil refineries.

There were reports of Japan recently imported liquefied natural gas from Malaysia and Indonesia. Additional reports suggest that Japan is to receive oil from Russia; the export will rise to 18 million tonnes of crude oil – nearly double the normal capacity Russia exports to Japan.

Unrest in Syria – update

The violent protests against the current regime of Bashar Assad – the ruler of Syria, progress. As there were reports from the city Daraa, located in the south of Syria, where six protestors were killed. This news doesn’t have any direct affect on the oil market however it could adversely affect the stability in the Middle East if the situation will further escalate.

Bahrain & Yemen protests – update

President Ali Abdullah Saleh stated yesterday that he will step down from his presidency at the end of the year but won’t do so immediately. This news didn’t stop the thousands of protestors who continue calling for the immediate resignation of Saleh.  In Bahrain there are still protests as well that bring uncertainty not only to the entire region, but also to the growing financial market in Bahrain.

Yemen and Bahrain are oil producers (but small compare to Libya) with proven reserves of 3 billion barrels and 0.12 billion barrels as of January 2011, respectively.


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 104.73 USD / barrel, a 0.24 USD/b decline or 0.23%, as of 8.47*.

The Dated Brent spot crude oil is at 115.38 USD / barrel – a 0.45 USD/ barrel decrease as of 8.57*.

(* GMT)

Crude Oil price Outlook and Analysis:

Despite the current war in Libya, it seems that the “Libyan effect” on crude oil prices might start to subside considering that most of the uncertainty attributed to the Libyan affect is incorporated in oil prices. Nonetheless might continue to rise but at a much more moderate rate than before and we will probably see more moderate price fluctuations.

I speculate that crude oil prices won’t show any further rapid price hikes and crude oil prices will moderately change with no clear trend as the week will progress.

The Brent oil and WTI spread: as of yesterday, March 22nd the difference between Brent and WTI reached 11.83$/b; I speculate that the spread will continue to range around 10-13$/b as it did in the last month and seen in the graph below and the timing of each of the major news that might have affected crude oil prices and the premium of Brent oil over WTI including the Egyptian riots followed by the Libyan riots and finally the tsunami attack in Japan.


Gas prices March 2011 Brent oil and WTI spot oil 22 March Libyan riots effect

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):


15.30 – EIA report about Crude oil inventories

18.00 – Chairman of Fed – Ben Bernanke’s speech


15.30 – EIA report about Crude oil inventories

18.00 – Chairman of Fed – Ben Bernanke’s speech




For further reading (in this site):