The recent news continue to come from the Middle East as the US sent two warships to the Middle East to reach Libya, while in Iran there are were violent protests, all this rose the anxiety level in the Middle East, might have affected the recent rises in crude oil price.
Let’s examine the recent activity in the energy market and analyze the effects of the recent news from the Middle East on crude oil price:
Yesterday, Iranian blogs reported of violent protests in Tehran between protestors from the opposition and Military forces.
The recent reasons was that protestors were calling the release of opposition leaders Mousavi and Karroubi from jail, after they were taken to an undisclosed location. Iran officials claim Iran won’t release the location of Mousavi and Karroubi as it’s an internal matter.
Iran, one of the founding members of OPEC, holds the third largest proven oil reserves in the world with 137.6 billion barrels of oil as of January 2010; and the second largest natural gas reserves worldwide.
Iran is also the second largest producer of oil after Saudi Arabia with 3.8 million barrels of oil per day during 2009.
If the recent riots in Iran will develop into a full blown scale of conflict with the Iranian regime, as it’s currently is in Libya and was in Egypt, this could adversely influence the uncertainty in the Middle East, which is already high to begin with. And consequentially, this news might affect crude oil price in the short term at least due to the increase in anxiety among oil traders. At this point, despite the recent rise in oil prices yesterday it’s hard to determine if this news from Iran affected traders.
The turmoil in Libya enters the month of March and now the US starts to take more of an active role in this turmoil:
There are reports that the US has moved two of its warships with 2,000 Marines to the Mediterranean Sea for humanitarian assistance to the people of Libya. It’s expected to pass the Suez Canal later on tomorrow.
In the meantime Muammar Qaddafi remains adamant to stay in Libya and fight the rebels.
Despite the news for a significant reduction in oil and gas production in Libya, OPEC members, mainly Saudi Arabia, already stepped in and moved to compensate the loss in Libya’s oil production of nearly 0.8 mb/d by increasing its oil production.
Petroleum stocks in the US
Today the EIA will publish its report on petroleum stocks: The current speculation around this report, according to Bloomberg, is that oil stocks will rise by 0.75 million barrels, compare to previous week
Current crude oil price
Asia markets currently start off with mixed trends to major oil prices:
The Nymex crude oil price, short term futures (March 2011 delivery) is traded at 100.25 USD / barrel, a 0.62 USD/b rise or a 0.62%, as of 9.11 AM*.
The Dated Brent spot crude oil is at 115.64 USD / barrel – a 0.38 USD/ barrel decrease as of 9.21 AM.*
Crude Oil price Outlook and Analysis:
The effects of the Middle East turmoil continue to be one of the major contributors to the fluctuation in crude oil price.
After yesterday’s rises, today the market didn’t start with major prices increase; This current slowdown in crude oil price doesn’t mean we shouldn’t except crude oil to (possibly) continue on rising; as long as there is high uncertainty in the Middle East there is still a chance of ongoing rises (and falls) in the short term, and as I have stated before the volatility will play a major role here; however, this adverse effect might evaporate as soon as the turmoil will be resolved (if and when) and will likely to pressure oil price to decline in mid and long term, even if there will be some residual effects (e.g. a continuous decline in Libya’s oil production in the future).
Here is a reminder of the top news that will be published today that might influence the markets (all times GMT):
12.30PM – Australian Bureau of Stat. will publish the trade balance report
13.00PM – Chairman of Fed – Ben Bernanke testifies
15.30PM – EIA report about Crude oil inventories
13.30PM – Department of Labor report – US unemployment claims
15.30PM – EIA report about Natural gas storage
For further reading (in this site):
- Oil prices outlook – 1 March
- Crude oil price in 2010 and outlook for 2011
- Oil prices soared as Libyan riots continued – Weekly recap 21-25 February
- Weekly outlook for Crude oil, Natural gas and Gold 28 Feb – 4 Mar