Rebels ward off Qaddafi’s forces from Ajdabiya | oil outlook 18 April

Oil prices finished the week with moderate rises, however during the week they didn’t do much. The turmoil in the Middle East continues to escalate mainly in Libya, how this will affect the oil market for this week?

Let’s examine the main news for today, April 18th that might affect the crude oil markets:

Crude oil price during April

During April, up to April 15th, WTI crude oil price crawled up as it moderately inclined by 2.0%, and Brent oil rose by 4.6%.  During last week, however crude oil prices didn’t do much as they have finished the week in a similar price level they have started the week.


Crude oil prices April 2011 Brent oil and WTI spot oil 18 April

The Australian dollar continues to show a strong correlation between its daily percent changes and Brent and WTI oil prices daily percent changes. The correlation is stronger between WTI and AUD/USD than Brent oil, however since the U.S. only imports a fraction of its oil from Australia, this put into question if this correlation has any merit or might indicate of another interfering variable that connects the two series together.

Correlations wti and Brent oil prices with AUD USD  Dec 2010- April 18 2011

Libyan conflict – update

The recent news from Libya is that the rebels have managed to ward off Qaddafi’s forces from the city of Ajdabiya, in the central region of Libya.

In the mean time, Qaddafi’s forces keeps on bombing Misrata, which is the main rebel held city, in the western part of Libya.

NATO also continues its air assault on Qaddafi’s aircraft missiles sites near Libya’s capital Tripoli.

Libya’s oil production, which was set at 1.6 million barrels per day, fell by over 70% since the riots had begun in February 2011. During March, OPEC oil supply fell by 0.89 mbl/d to reach 29.2 mbl/d, which is roughly 0.6% of the global oil production; on the other hand, the oil production of non-OPEC countries rose by 0.2 mb/d to 53.3 mbl/d.

Germany seized $6 billion Libyan funds

According to the Spiegel , Germany has recently seized Libyan funds worth of over six billion USD. Germany representatives said that the UN could use these funds to assist the Libyan people in humanity assistance.

Nigeria Elections

Bloomberg also reports of elections in Nigeria, and it appears that Jonathan is close to be re-elected as Nigeria’s president. The stability of Nigeria to U.S. is imperative, since Nigeria among the leading OPEC countries in exporting crude oil to the US with over 31,220 thousands of barrels during January 2011. During 2009, Nigeria’s oil production reached nearly 2.2 million bbl/d out of which 36% was exported to the U.S.

Tornados in North Carolina

There are reports of over 62 tornados storms that attacked regions in North Carolina, U.S.A. These tornados are reported to be the deadliest since the tornados attacks of 1984. There are current reports of 45 fatalities. It’s not clear yet how these events will have an effect on the US economy and energy domestic energy market.

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 (May 2011 delivery) is traded at 108.88 USD / barrel, a 0.78 USD/b decrease or 0.71%, as of 9.36*.

The Dated Brent spot crude oil declines by 0.77$/b and it is at 123.29 USD / barrel as of 9.47*.

(* GMT)

Thus, the current premium of Brent over WTI is at 14.41$/b.

Crude Oil price outlook and analysis:

Last week’s “no trend” of oil prices might continue during this week as well because crude oil prices contain most of the high uncertainty in the oil market.  I speculate crude oil prices will remain high in the short run, but at some point they will have to come down, as the uncertainty around the supply of oil will dissipate.

Difference between Brent oil and WTI spread: as of Friday, April 15th, the premium of Brent oil over WTI declined to 14.40$/b – its smallest gap during last week.

As presented  in the chart below, the gap between Brent oil and WTI has an upward trend during April, even though the premium settled in the last few days around 14-16$.  I speculate that the premium will remain around the 14-16$ during the week.


Difference between Brent and WTI crude oil price 2011 18 April

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


13.00 – Canadian Core CPI


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