The oil market starts to cool off in the last few days with small fluctuations and no clear trend (as expected). Will these conditions continue?
Let’s review the main news items that are related to the oil market for March 25:
EU Economic summit
Today and tomorrow there will be an economic summit of all 27 Euro countries. The agenda for the summit will include how European Union banks will disclose their sovereign debt holdings as part of stress test; in the summit Ireland will seek a better deal for the 67.5 EUR billion in loans it received from EU and IMF.
Japan’s turmoil aftermath– update
The turmoil in the nuclear reactor in Fukushima is far from over and according to recent update there are still high radiations levels in the vicinity of Fukushima reaching to Tokyo.
The main speculation vis-à-vis the energy market remains around the aftermath of Japan, and when will Japan increase its demand for energy to rebuild the country followed all the tsunami and earthquake damage (see here for more on the affects of Libya and Japan on oil markets).
Middle East and North Africa – update
Libya: The allied forces progress with their assault on Qaddafi’s ground forces. The bombing even reached the outskirts if Tripoli where Libyan military bases are located as reported by CNN. There is still uncertainty as to how and when will the allied forces’ attack will end in Libya. Nonetheless, it seems so far that Europe, one of the main importers of Libyan oil and natural gas, is handling for now the decline in imports from Libya as oil prices didn’t increase much during this week.
Syria: according to recent reports dozens of protestors died in conflicts between protestors and Syria’s forces. The confrontations and protests took place in Daraa – a city south of Syria. As a result, Bashar Assad is said to allow certain reforms in an attempt to cool down the protesters.
Israel: following the missiles launched towards cities in the south of Israel and a bombing in Jerusalem a few days ago, there are concerns of a full scale retaliation of IDF in the Gaza strip that might further tilt the instability in the region.
There are also ongoing protests in Yemen and Bahrain.
Oil market doesn’t react so far to these news items, mainly since they don’t have a direct link towards the oil markets, however if the instability in the Middle East will further progress, it might adversely affect the energy market.
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 105.64 USD / barrel, a 0.04 USD/b incline or 0.04%, as of 10.27*.
The Dated Brent spot crude oil is at 115.63 USD / barrel – a 0.05 USD/ barrel increase as of 10.39*.
Crude Oil price Outlook and Analysis:
The oil market is starting to level out in the last few days and will probably continue in this direction in the short term.
I still speculate that crude oil prices won’t show any further rapid price hikes and will moderately change with no clear trend as the week will progress.
The Brent oil and WTI spread: as of yesterday, March 24th the difference between Brent and WTI declined to 10.54$/b; I speculate that the spread will continue to range around 10-13$/b as it did in the last month and seen in the graph below.
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):
10.00 – Monetary developments in the euro area
13:30– US GDP 4Q report
All day – EU Economic Summit
All day – EU Economic Summit
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