The oil markets continue to trade down but moderately, with no clear trend yet. The news on how the US forces located and killed the known terrorist – Obama bin Laden continue to occupy the news, but after the initial reaction to this news, will the oil market continue to respond to this news?
Let’s examine the oil market for today, May 3rd:
Crude oil prices – May
Yesterday WTI spot oil moderately declined by 0.36% and Brent oil price also decreased by 1.35%.
Notice in the chart above, of the WTI spot oil and Brent oil prices during April up to yesterday, how WTI spot oil had a moderate upward trend in the past couple of weeks, while Brent oil had a much less upward trend. This shows how the gap between WTI and Brent oil declined.
Spread between Brent oil and WTI spread: as of yesterday, May second, the premium of Brent oil over WTI reached 10.84$/b – its lowest level since March 31st.
The premium of Brent oil over WTI remained around the 11-13$/b mark.
I still think that the premium might continue to moderately decline, but will remain around a double figure gap ranging between 10 and 13 USD.
Bin Laden was killed by US
The news on the killing of known terrorist and head of al-Qaida – Osama Bin Laden, as reported by the president of the United States – Barack Obama on Sunday night will continue to be among the major news items during week.
In regards to the major commodities, such as crude oil, this news seemed to have an effect at the beginning of the day as crude oil prices fell very precipitately, but by the end of the business day the oil prices bounced back and finished the day with moderate falls. As expected, this news, while very important on a global scale, didn’t change much the oil market and will likely to have little effect on oil traders during the rest of the week.
The Shale Boom
There is an article in Reuters about the Shale boom in the US, mainly in Texas. The rising drilling in Shale oil continues to rise not only in the US but also in other countries.
I have referred in the past to the rising importance of shale gas; however shale oil is also making an important impact on the oil market in the US.
Morgan Stanley buys commodities
According to Bloomberg, Morgan Stanley is still going long on oil and other major commodities, even though Goldman Sachs advised a few weeks back to its clients to start selling the major commodities, because they are over priced.
If traders and money managers continued to bet on oil and gold during April, this might explain the rising prices in these commodities during that month, even though the supply and demand forces of these commodities aren’t linked as they used to their traded prices.
Update from the Middle East
Following the attack on Gaddafi’s compound by NATO aircrafts, in which Gaddafi’s youngest son and three of his grandsons were killed, the assault of NATO air force is only intensifies.
Most of the Libyan fighting takes place in the rebel-held western city of Misrata where Gaddafi’s forces continue to strike the rebels.
In the mean time the Nigeria continues to have an important role in exporting its crude oil to the US especially since the uprising in Libya began back in February 2011. According to recent reports, Nigeria’s oil exports are estimated to reach 2.15 bbl/d by June compared to the April exports of 2.06 bbl/d – or a 4% increase.
The deal to end the current political crisis in Yemen between President Ali Abdullah Saleh and his opposition nearly collapsed. There is still a deadlock in the negations about the departure of Saleh Presidency and the replacement.
According to Bloomberg, Syrian military continues to send armed vehicles and tanks to the southern city of Daraa in an attempt to slow down the protests against the Following the current regime run by current President of Syria Bashar al-Assad.
The UK, US and UN Human Rights Council all took steps against the current violence in Syria.
Current crude oil prices
Major oil prices are currently traded in the European markets with moderate falls:
The Nymex crude oil price, short term futures (June 2011 delivery) is traded at 112.48 USD / barrel, a 1.04 USD/b decrease or 0.92%, as of 11.16*.
The Dated Brent spot crude oil declines by 1.86$/b and it is at 123.75 USD / barrel as of 11.27*.
Thus, the current premium of Brent over WTI is at 11.27$/b.
Crude Oil price outlook and analysis:
The ongoing decline in WTI oil prices that started off yesterday might be driven in part from the reaction to the news about Bin Laden’s demise, and the timing we are at – the beginning of the month. This timing usually stirs up heavy trades that shift the direction of the recent trend of oil prices.
I still speculate that crude oil prices will remain at a high level, but in the mid to long term will eventually come down, once the uncertainty around the supply of oil from the Middle East (mainly in Libya) will dissipate.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
5.30 – Reserve Bank of Australia – rate statements
15.30 – EIA report about Crude oil inventories
For further reading (in this site):
- Weekly outlook for May 2-6
- Oil prices moderately inclined last week – Weekly recap 25-29 April
- Petroleum stocks bounced back with a moderate rise – April 28