The rising Instability in the Middle East and oil prices outlook 25 April

The instability in the Middle East took another turn as the confrontations in Syria escalate, the NATO forces attack Gaddafi’s compound in Tripoli, and the riots in Yemen don’t subside. These recent events might affect the stability of the commodities markets including the crude oil market. That being said, currently crude oil prices are showing only moderate rises.

Here are main news items for today, April 25th that might affect the crude oil market:

Crude oil prices during April

Up to April 21st, WTI crude oil moderately inclined by 3.87%, and Brent oil rose by 4.7%. These figures are mostly affected by the price hike of WTI and BRENT oil from April 20th.


Crude oil prices April 2011 Brent oil and WTI spot oil  25 April


Libyan war – update

According to the Guardian, Gaddafi’s compound was hit by NATO bombing. Muammar Gaddafi’s office building in Tripoli was destroyed by NATO air strike.  This attack was followed the two day assault on Misrata by Gaddafi’s armed forces.

Libya’s oil production was once at 1.6 million barrels per day before the Libyan war commenced back in February 2011; since then it has declined by nearly 1.3 million bbl/d.  When the uprising in Libya began back in February 2011, it had a clear effect on oil prices as it pushed oil prices up. Since then, however the events in Libya didn’t seem to push oil prices up as much as keep crude oil prices at their high level.

Saudi Arabia is to remain at its current oil production of 12.5 million barrels per day, according to Bloomberg. This might not have an adverse effect on oil prices, since during March the supply was met by the demand, despite the decline in Libya’s oil production.

Instability in Yemen

There were reports over the weekend that President Ali Abdullah Saleh is willing to resign from his Presidency within a month in exchange for immunity against any future prosecution.

The opposition doesn’t seem to agree with Saleh’s concession as there were demonstrators rallied today in Sana and demand the president’s unconditional resignation.

Violent confrontations in Syria

The recent news from Syria is that tanks and armored cars have entered civilian regions in Daraa, a city south of Syria. In the confrontations between the protestors against the regime of Syrian President – Bashar al-Assad and the Syrian army, at least 18 people were killed so far.

Over the weekend there were reports of over 88 people dead in the violent protests in several cities in Syria.

This escalation in the stability in Syria might further contribute to the instability of the Middle East and might even have some effect the financial markets including crude oil market.

Current crude oil prices

Major oil prices are currently traded in the US markets with moderate rises:

The Nymex crude oil price, short term futures (May 2011 delivery) is traded at 112.70 USD / barrel, a 0.41 USD/b increase or 0.37%, as of 12.32*.

The Dated Brent spot crude oil inclines by 0.18$/b and it is at 124.39 USD / barrel as of 12.43*.

(* GMT)

Thus, the current premium of Brent over WTI is at 11.69$/b.

Crude Oil price outlook and analysis:

Crude oil prices showed last week some strength, but they still didn’t increase by a substantial rate during April (so far). The events in the Middle East don’t seem to influence the minds of investors and traders as they may feel that oil prices are already high and already incorporate most of the uncertainty that is attributed to the instability in the Middle East

Therefore I still speculate that WTI oil price will continue to increase but very moderately along with Brent oil; Furthermore, crude oil prices might remain at a high level, but in the mid to long term will eventually come down, once the uncertainty around the supply of oil will dissipate.

Difference between Brent oil and WTI spread: as of Thursday, April 21st, the premium of Brent oil over WTI declined to 12.50$/b.

The premium of Brent oil over WTI continues to slide as seen in the chart below. It’s still early to conclude if this recent decline will be the start of the closing of the gap between these two energy prices, however for now, I speculate that the premium might continue to moderately decline and range between 10 and 13 USD during the rest of the week.


Difference between Brent and WTI crude oil price 2011 25 April

Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):


15.00 – US new homes sales


2.30 – Australian CPI for first quarter 2011


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