Oil prices moderately decline – Oil daily outlook 19 May

Crude oil prices inclined yesterday despite their falls during most of May; oil prices are currently traded with moderate falls but as the day will progress you may see shifts in direction.

 

Let’s examine the recent news related to the crude oil market for today, May 19th:

Crude oil prices – May

 

Yesterday, the WTI crude oil prices inclined by 3.84%; During May, up to yesterday May 18th, WTI spot oil decreased by 11.72%;

Brent oil price also sharply inclined yesterday by 2.86%; during May Brent oil declined by 11.11%.

The chart below shows the normalized prices (May 2nd =100) of WTI spot oil and Brent oil during May.

As seen, crude oil prices fell sharply at the first few days of May and since then remained more then 10% below the initial price level.

Crude spot oil prices 2011 Brent oil and WTI spot oil  2011 May 19

The chart below also shows that the variance in May of the difference between Brent oil and WTI spot oil reached 3.55 – the highest level since February 2011 (up to date). This shows a shift in the fluctuations in the difference between Brent and WTI.

 

Variance of the difference between WTI and Brent spot oil 2010-2011 (Monthly) MAY 19

The premium of Brent oil over WTI: this gap reached on Wednesday 12.42$. During May, the premium started to change rapidly compared to recent months and ranged between 12 and 17.8$.

Petroleum stocks in the US

The US Energy Information Administration published yesterday its weekly report on petroleum stocks: according to the report, US crude oil stocks remained  last week after they inclined by 6.5 million barrels a week earlier. For the week ending on May 13th the oil stocks remained on 1,774.0 million barrels – the highest level since February 25th, 2011 (See here the recent petroleum report).

 

 

The chart below presents the petroleum and oil stocks levels compared to the WTI crude oil prices during 2010-2011.

Weekly U.S. Ending Stocks of Crude Oil and WTI spot oil price 2011 May 13In total, during last week there were rises in imports and refineries inputs and no changes in US production and petroleum stocks.

World news – oil markets

 

Middle East

 

Iran and upcoming OPEC meeting

Mahmoud Ahmadinejad, President of Iran, plans to attend the upcoming OPEC meeting next month on June 8th, in Vienna Austria. There is speculation that he will try to derail any attempts by Saudi Arabia to raise the current OPEC oil output. Since 2008 the official OPEC output didn’t change even though in recent months there was a decline in output, mainly due to the decline in Libya’s oil production.

Iran is among the founding countries of OPEC and holds the world’s third largest proven oil reserves with 137.6 billion bbl, and is the second largest oil producer worldwide.

If Ahmadinejad will try to limit oil output, this could maintain crude oil prices in the months to come.

Libya

In the mean time, Libya’s largest oil company, which had an oil production capacity of 450,000 bbl/d – nearly third of the entire Libyan oil production capacity, said it won’t resume oil production until the current conflict between the rebels and Gaddafi.

This news only maintains the notion that until this feud will be resolved the oil production in Libya won’t incline.

The rebels voiced their desire to reach the upcoming OPEC meeting and to represent their interests.

Yemen

Current President Ali Abdullah Saleh is reported by Bloomberg that he refused to sign a proposal to transfer his power, despite the pressure made by the U.S.

For now the protests in Yemen calling for the stepping down for Saleh continue in major cities in Yemen.

Yemen controls the Bab al Mandab strait – one of the most important strait in the world; it connects the Red sea to the Golf of Aden. This strait is pivotal for transport of commodities including oil. Up to now, there weren’t any news related to any impediments in the strait.

Syria

The U.S. is also turning on the heat on Syria and imposed sanctions in Syrian President Bashar al-Assad and other state officials because of the attacks of Syrian army on Syrian protestors in the recent couple of months.

See here for the more news updates from US Middle East, Japan and Canada.

Current crude oil prices

Major crude oil prices started off the business day with moderate falls in the US markets:

The Nymex crude oil price, short term futures (June 2011 delivery) is traded at 98.75USD / barrel, a decline of 1.35 USD/b or 1.35%, as of 16.52*.

The Dated Brent spot oil price inclines by 0.75$/b and it is at 111.77USD / barrel as of 17.03*.

(* GMT)

Thus, the current premium of Brent over WTI is at 13.02$/b.

Crude Oil price outlook and analysis:

 

Crude oil prices bounced back yesterday with rises, but they are currently traded with moderate falls.

 

Despite the recent rises, oil prices remain low compared to their prices at the beginning of the week, but high compared to 2010.

 

Oil traders might have voiced their concerns over the news revolving the upcoming OPEC meeting, and drove crude oil prices up; nonetheless, this isn’t likely to further drive crude oil prices up until more information will come from the OPEC meeting. In any case, crude oil prices are still very high, so, if any, they will remain around the 100$ for WTI spot oil and 110$ for Brent oil.

 

There is still uncertainty related to the Europe and its demand for oil stem from the debt crisis in Greece, Ireland and Portugal;  and from the US side, the future steps that the Fed to consider as the Quantitative easing plan will end in June.

 

I still speculate that in the short term all these factors will continue to pull crude oil prices in different directions and eventually keep crude oil prices at their current high prices.

 

Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):

Today

13.30 – Department of Labor report – US unemployment claims

15.30 – EIA report about Natural gas storage

Bank of Japan – rate decision and monetary policy statement

Tomorrow

13.00 – Canadian Core CPI

 

[ratings]

 

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