Let’s review the main news items that are related to the oil market and might affect crude oil price:
Libya Turmoil update
Qaddafi continues the air strikes and targets not only the rebels’ hubs, but also oil facilities along the coastline. In particular, Qaddafi’s air force bombed Oil pipeline leading to Es Sider town and storage tanks in Ras Lanuf oil terminal, the eastern part of Libya, where the rebels are currently at.
In the aftermath there will probably be damage that will take time to bring Libya’s oil output up to speed.
As a result there are reports that Libya’s oil output declined to one third, from 1.6 million barrels per day to nearly 500,000 barrels per day.
Nevertheless, Saudi Arabia keeps on trying to calm the oil market and claims that there won’t be a shortage in oil.
“Saudi Arabia’s Minister for Petroleum and Mineral Resources Ali Al-Naimi has said that the amount of crude available in the world market was “very adequate” and dispelled the impression that the Libya crisis could cause a supply shortage.”
European Debt and Euro Summit
Tomorrow, March 11th, there will be a Euro Summit regarding major economic issues and policies affecting the Euro area, including the bailout funds given to Greece and Ireland, and prepare for a full summit of all 27 Euro countries at the end of the month.
In the mean time, there are still concerns regarding the debt Portugal has as it might require a bailout from the ECB if it won’t be able to replace its current government bonds. For more on this subject about Portugal’s debt concern see here.
Petroleum stocks in the US
Yesterday the EIA published its report on petroleum stocks: and, as expected, oil stocks continued to fall. . For the recent petroleum stock report, see here.
EIA changed its oil prices outlook
The EIA also published its updated energy outlook report for 2011, in which the EIA’s WTI spot price outlook for 2011 was updated from 93$/b to 102$/b.
“Day of Rage” in Saudi Arabia
According to Human Rights Watch, the Saudi Arabia “day of rage” is scheduled for tomorrow March 11th and March 20th, in which there will be protests nationwide. This news keeps the oil market on its toes to see if and how this protest will have any affect on the stability in Saudi Arabia. Some already speculate that it will cause price hikes in oil on Friday. I think its premature to speculate on this news item and the sustainable effect it could have on the oil market.
Current crude oil price
Asia 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 104.45 USD / barrel, a 0.07 USD/b incline or a 0.07%, as of 9.07 AM*.
The Dated Brent spot crude oil is at 115.38 USD / barrel – a 0.06 USD/ barrel increase as of 9.17 AM.*
Crude Oil price Outlook and Analysis:
If I would to speculate, it seems that the effect the Libyan turmoil has on crude oil prices will subside as other OPEC members pick up Libya’s oil production and increase theirs, and by doing so reduce the pressure of oil prices to further increase. Nonetheless, there are many other factors that could affect crude oil price, mainly Brent oil as there are rising concerns over the debt crisis
The Brent oil and WTI spread: as of yesterday, March 9th the spread between the two commodities’ prices inclined to 11.55$/b, after the spread has been closing all week. It will be interesting to see how this spread will progress and keep an eye on the Euro Summit because it might be related
This might be because the spillover effect of the turmoil in the Middle East starts to catch up North America, causing the spread between WTI oil price and Brent oil to close. In the graph below you can see the closing of the gap. If I would to speculate I think that this gap will remain and Brent oil price will still be higher than WTI spot oil, but at a lower premium.
Here is a reminder of the top news that will be published today that might influence the markets (all times GMT):
7.30AM – German Trade Balance report
13.30PM – Department of Labor report – US unemployment claims
13.30PM – Report on American Trade balance
13.30PM – Report on Canadian Trade balance
15.30PM – EIA report about Natural gas storage
12.00PM – Canada unemployment rate report
All day – EU Economic Summit
For further reading (in this site):
- Petroleum stocks keep on falling | EIA raise oil forecasts – March 10
- U.S Labor report didn’t show improvement in employment
- Weekly outlook for Crude oil, Natural gas and Gold 7-11 March
- Oil prices rise as Libyan turmoil progress – Weekly recap 28 Feb 4 Mar