Let’s see how does the crude oil market might react as the day will progress, analyze the recent news from the Middle East and check if there is any news that might affect crude oil price:
Libya Turmoil update
The fights in Libya progress as civilians and rebels are continued to be attacked by warplanes sent Qaddafi. The current death toll is at roughly 1,000 to 2,000 people.
Libya, a member in OPEC, holds the largest oil reserves in Africa with 44 billion barrels as of January 2010, is a major exporter of oil mainly to countries in Europe such as Italy, Germany and France.
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 US crude oil stocks have increase by 3.8 million barrels, compare to previous week. For the previous petroleum stock report, see here.
“Day of Rage” in Saudi Arabia
As the Middle East turmoil progressed, there were reports about a “day of rage” in Saudi Arabia – the world largest oil producer. The reports say that websites in Saudi Arabia have called for protests on a national level on March 11th and March 20th. It will remain to be seen if these protests will take place, as suggested by other reports.
OPEC members are to raise their oil output
OPEC is yet to call for an emergency meeting over the turmoil in Libya, however there are reports that Kuwait, United Arab Emirates and Nigeria have joined Saudi Arabia and raise their oil production to close the void created by Libya ad its oil output has declined, according to IEA, from nearly 1.6 mb per day to 0.6 mb per day.
Current crude oil price
Asia markets currently start off with mixed trends in major oil prices:
The Nymex crude oil price, short term futures (April 2011 delivery) is traded at 104.96 USD / barrel, a 0.06 USD/b decline or a 0.06%, as of 9.45 AM*.
The Dated Brent spot crude oil is at 113.74 USD / barrel – a 1.08 USD/ barrel increase as of 9.55 AM.*
Crude Oil price Outlook and Analysis:
If I would to speculate, even though the turmoil in Libya progresses, the effect it has on the oil market will continue to subside and thus the pressure this news has on crude oil prices will continue to scale down 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.
The Brent oil and WTI spread: as of yesterday, March 8th the spread between the two commodities’ prices declined to 7.65$/b – the smallest gap since January 19th. 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):
Tentative – China’s foreign trade balance
12.30PM – Australian Bureau of Stat. will publish the unemployment rate
15.30PM – EIA report about Crude oil inventories
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
For further reading (in this site):
- 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