The crude oil market continue to remain put as the WTI oil price remains near the 100$ mark. The day started off with moderate rises.
Let’s examine the recent news related to the crude oil market for today, May 17th:
Crude oil prices – May
Yesterday’s business day ended with WTI crude oil prices declined by 2.29%; During May, up to yesterday May 16th, WTI spot oil decreased by 14.1%;
Brent oil price also declined by 2.64%, and during May Brent oil declined by 12.5%.
The chart above shows that crude oil prices didn’t change much during the last couple of weeks.
The premium of Brent oil over WTI: this gap reached on Monday 13.24$. During May, the premium also didn’t change much and in fact, as presented in the chart below, except for May 6th, the range was less then 2.5$.
The chart below also shows that the variance in May of the difference between Brent oil and WTI spot oil reached 1.53 – the lowest level in 2011 (up to date).
World news – oil markets
Mississippi Flooding – Bloomberg reported that the Mississippi river water poured via 11 gates of Louisiana’s Morganza floodway and thus reduced the threat the flooding had over the second-largest oil refinery in the U.S.
Oil and Gas mergers rose by 69% during first quarter – there was a rise in oil and gas industries in the US according to report released by PwC. This rising activity might be stem from the high energy prices.
Wildfires stem by strong winds caused a shut down in Alberta, a city located in one of Canada’s largest oil producing province. As a result, oil production was shut in many companies in the area, estimated at over 50 thousand bbl/day. This might impede oil export to the US in the near future.
According to recent report from Japan, during April, Japan purchased, as expected, very high quantities of crude oil and liquefied natural gas compared to a year earlier. The highest increase was in crude oil – a rise of 57.2%; natural gas rose by only 10.3%. This rising in purchase of crude oil and LNG is mostly because of the decrease in nuclear power run rate of 50.9% compared to April 2010. The power generation was still low in April and was 8.4% below a year earlier.
As the power consumption in Japan will continue to rise, it’s expected that Japan will increase its imports of crude oil and LNG.
Libya – the fighting between NATO forces and the rebels and Gaddafi’s forces continues with no clear end in sight. In the mean time, there are no clear guidelines from the UN as to whether or not to do oil companies can do business with the rebels and purchase their oil.
During the recent war in Libya, its oil production fell from 1.6 million bbl/d back in January 2011 to an estimated at 0.4 million bbl/d.
Yemen – The turmoil in Yemen is still far from over. There are still reports of confrontations between the military forces and protestors. Yemen controls the Bab al Mandab strait – one of the most important strait in the world; it connects the Red sea to the Golf of Aden. This strait is pivotal for transport of commodities including oil.
Nigeria – there is a dispute, according to Reuters, between Nigeria and Exxon over oil drilling licenses.
Current crude oil prices
Major crude oil prices started off the business day with moderate rises in the European markets:
The Nymex crude oil price, short term futures (June 2011 delivery) is traded at 97.38 USD / barrel, a rise of 0.01 USD/b or 0.01%, as of 10.09*.
The Dated Brent spot oil price inclines by 0.69$/b and it is at 111.47 USD / barrel as of 10.19*.
Thus, the current premium of Brent over WTI is at 14.09$/b.
Crude Oil price outlook and analysis:
Crude oil prices started off the week with falls, but it doesn’t indicate of a downward trend yet.
There are two different forces that will likely to affect crude oil prices during the week: from the demand side – the speculation around the major economies’ including Europe and US; and from the supply side –the speculation around the oil market including the oil production of OEPC. These forces seem to affect oil prices in different directions: the demand pulls oil prices down, and supply pulls it up.
The uncertainty in the European demand also relates to the debt crisis in Greece, Ireland and Portugal and this debt crisis’ effect on economic condition of Euro Area; and from the US side, the future steps that the Fed to consider as the Quantitative easing plan will end in June.
Japan and China – two important imports of crude oil – are likely to affect the world demand in the near future. Japan is likely to raise its import of oil, but China might slow down its growth rate.
I still speculate that in the short term, crude oil prices will remain near the 100$ mark for WTI and 110$ for Brent oil.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
2.30 – Monetary Policy meeting Australia’s Bank
15.30 – EIA report about Crude oil inventories
19.00 – FOMC meeting minutes regarding rate decision
For further reading:
- Weekly outlook for May 16-20
- Oil prices moderately declined last week – Weekly recap 9-13 May
- US Petroleum stocks keep on soaring – May 12