Oil prices Monthly outlook –May 2011

The crude oil market took another step forward during April as oil prices rose compared to March by 6 to 7%.

I will shortly present the main changes in crude oil prices (WTI and Brent oil) during April, and refer to the main points to look for when considering the crude oil prices in May 2011.

During April 2011 WTI spot oil prices rose by 5.4%, and Brent oil price increased by 6.7%; these rates are nearly double the rate increase compared to March. The April average prices also rose by 6.5% for WTI spot oil and 7.6% for Brent oil compared to March.


Crude spot oil price WTI and Brent oil 2011 April-may 15

The chart above is normalized to the 100= April 1st for both major energy commodities (Brent oil and WTI spot oil).

These rises are related, in part, to the high uncertainty in the Middle East and that OPEC didn’t raise its production; in fact, the oil production during March fell by 626.7 thousands bbl/d compared to February 2011 – mainly due to the fall in oil production by Libya.

Another factor was the tsunami in Japan that caused several of Japan’s nuclear power plants to shut down and consequentially caused an increase in natural gas and crude oil import during April and May.

During April there was also a very high correlation among daily percent crude oil prices (WTI and Brent oil), AUD/USD and USD/CAD.

Correlations wti and Brent spot oil prices with EUR USD  Dec 2010- APRIL MAY 15 2011 These findings show that the financial markets were correlated and that the high crude oil prices are related with the appreciated of Australian dollar, Canadian dollar and Yen against the US dollar.

This factor is likely to continue to exist in May.

The daily prices also showed a moderate increase in the standard deviation in April compared to March. In any case the high volatility that was demonstrated during February didn’t repeat in April.


standard deviation of the spot oil prices  WTI and Brent spot oil 2010-2011 (Monthly) MAY 15

Brent oil premium over WTI spot oil

The Difference between the two commodities remained around the 11-17$/b during April, and didn’t fluctuated as it did during March.

Difference between Brent and WTI crude spot oil price 2011 May 15 Crude Oil price forecast for May 2011:

The month of May started off with high volatility which is related, in part to speculation around the EURO/USD exchange rate; the latter is stem from the speculation around the heading of the US and European economies in the months to follow.

I speculate that the difference between Brent oil and WTI will continue to remain around the 10-15 $, and that the speculation around the energy commodities will cause many shifts and changes in direction but eventually the crude oil WTI prices will remain around the 100$ mark and Brent oil around the 110-115$ mark.

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