Crude oil prices continued to rise yesterday, but currently crude oil prices are traded with moderate falls;
Let’s examine the recent news related to the crude oil market for today, May 11th:
Crude oil prices – May
Yesterday, crude oil prices rose for the second time this month by 1.3%; During May, up to yesterday May 10th, WTI spot oil decreased by 8.4%;
Brent oil price also inclined yesterday by 1.65%, but during May Brent oil declined by 7.1%.
The premium of Brent oil over WTI reached on yesterday 13.71$/b – the highest gap in May so far.
Despite the rapid fluctuations in crude oil prices, the premium of Brent oil over WTI spot oil remained around the 10 and 14$ during May and as seen in the chart below the variance of the premium of Brent over WTI reached during May to 1.32, which is currently the lowest variance level in 2011.
I still think that the premium will continue to moderately fluctuate, but will remain around a double figure gap ranging between 10 and 13 USD.
Petroleum stocks in the US
The EIA will publish today its weekly report on petroleum stocks: According to Bloomberg the expectations are that US crude oil stocks inclined by 2.95 million barrels during last week. In the recent report, U.S. petroleum stocks continued to increase during last week by 7.5 million barrels, a 0.43% increase compared to the previous week. For the week ending on April 29th the oil stocks reached 1,767.6 million barrels. This was the largest injection since August 20th, 2010 (See here the previous petroleum report).
EIA outlook for 2012 shows oil market will tighten
According to the recent oil outlook of the Energy Information Administration for 2011 it expects that the OPEC crude oil production will decline in 2011 by 450,000 bbl/d compared to 2010, but the non-OPEC countries will increase their production by 690,000 bbl/d; the crude oil demand (worldwide) will rise by 1.4 million bbl/d in 2011 compared to 2010; and finally the onshore OECD oil stocks are expected to fall by about 20 million bbl in 2011.
This scenario shows that the delta between changes in oil supply and changes in oil demand is at -1.16 million bbl/d, i.e. the global demand will surpass the global production by 1.16 million bbl/d. This is why the oil stocks are likely to drop in 2011 and tightening the oil market which will keep the crude oil prices higher in 2011 than the prices in 2010.
News Updates related to oil market
- For the recent updates on Middle East situation including updates from Libya, Yemen and Syria see here;
- Yemen has halted its oil production due to the current turmoil in the country;
- Senate Democrats presented their plan to slash nearly 21 billion US dollar worth of tax deductions on the top five oil companies in the next ten years, in an attempt to use these funds to finance the federal deficit;
- Alaska senators already stated they oppose raising taxes on crude oil companies;
Current crude oil prices
Major crude oil prices are currently traded with moderate falls in the European markets:
The Nymex crude oil price, short term futures (June 2011 delivery) is traded at 103.58 USD / barrel, a decline of 0.3 USD/b or 0.29%, as of 10.28*.
The Dated Brent spot oil price declines by 0.29$/b and it is at 117.3 USD / barrel as of 10.39*.
Thus, the current premium of Brent over WTI is at 13.72$/b.
Crude Oil price outlook and analysis:
Following the rises of crude oil prices in the last couple of days, the oil market started off the day with moderate changes. There are still concerns related not only to the turmoil in the Middle East, but also to the speculation in the financial markets in regards to the economic condition of US and Europe.
I still speculate that crude oil prices will remain near the 100$ mark; however in the mid term will start to come down, as 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):
13.30 –Canadian Trade balance
13.30 – Report on American Trade balance
15.30 – EIA report about Crude oil inventories
13.30 – Department of Labor report – US unemployment claims
15.00 – Ben Bernanke, Chairman of Fed, testifies
15.30 – EIA report about Natural gas storage
For further reading:
- Weekly outlook for May 9-13
- Oil prices fell sharply last week – Weekly recap 2-6 May
- Petroleum and oil stocks in the US continued to rise – May 5