Oil Improves as US Consumer demand Improves

August 30^th, 2011: Oil prices rose to $87 a barrel in Asia as oil demands in the US improved. Benchmark oil for October delivery witnessed a hike by 22 cents reaching to $87.49 in the electronic trading of the New York Mercantile Exchange. Crude oil settled at a considerable high of $87.27 on Monday 29^th August.

Brent Crude in London for October delivery was also high at $112.30 on the ICE Futures exchange. Three weeks back crude was at $76, 16 percent lower than what it is today. This low price was owing to a widespread apprehension that the EU and the US economies might slip into a period of recession.

He month of July according to Commerce Department, witnessed a sharp rise in consumer spending which accounts to nearly 70% of the economic activity of a nation and this is perhaps the biggest in the last 5 months. Global stock markets too saw increase in spending. For instance the Dow Jones industrial average rose by 2.2 percent, and there were overall gains in most of the Asian stock markets.

With growing economic demands for oil crude oil is expected to head for a low, as apprehended by a few analysts. In Nymex trading, heating oil rose to 0.8 cents and reached to $3.03 a gallon, while gasoline gained 0.6 cents a gallon.

Also in conclusion to the final draft of a major deal between oil giants, most of the big energy companies of the world will have to surrender gas from Iraq’s southern oil fields, to a project led by Shell.

Overall a better week after about three weeks that were full of speculations and worries, with floods in the US and political instability prevailing in Iraq, oil prices last week were dismal, but a sunny morning seems not far.

Increase in oil price

Oil prices rose on Wednesday 24^th August 2011. Benchmark West Texas crude rose 75 cents to $86.19 per barrel in New York, while Brent crude was up $1.34 at $110.65 per barrel in London.

The Government reported that orders for long lasting, durable goods like autos and aircraft increased 4% in July, the biggest increase since March this report increased the price. Another reason for increase in a price is the nation’s oil supplies dropped by 2.2 millions barrel by last week.

SEB Commodity Research said that, oil prices could drop temporarily if the crisis in the oil-rich North African nation eases or if strongman Muammar Gadaffi is caught. “Markets have really held back their gains today”. Price initially shot higher on Wednesday after the release of data showing US durable goods orders. Oil and gas companies have successfully diversified their upstream business line. According to Edinburgh based Wood Mackenzie released on Monday, unconventional oil and gas, liquefied natural gas, and deep water oil and gas now make up about 50% of the future value of the international energy  giants, which is a Whopping $3.2 trillion.

As oil price is falling in New York the price pf dollar is increasing and the gold plunged the most in more than three years. Goldman Sachs analyst believe that the oil prices will rise in the next year, they told that the risk of US recession has risen, but their revised US economic outlook remain consistent  with a recovery at a slower pace, “which is typical following a housing bust.”

After seeing oil prices, investors must grapple with political protests in the world’s top oil exporter, Saudi Arabia, and the impact of the biggest earthquake on record to strike Japan. In coming week, crude market will be looking for clearer information on the condition of the Libyan oil and gas infrastructure says Sanjeev Gupta.

Oil Enters a new Phase with the Libyan crisis heating up

On August 25, 2011: U.S supply report gave mixed signs about the demand for crude oil after this report oil prices hovered above $85 a barrel in Asian market. There is an extreme fluctuation in oil prices over the last few months.

US economy slowed sharply in the first three months of the year as high gas prices cut into consumers spending. Inventories of gasoline jumped 6.4 million barrels last week and distillates rose 2.0 million barrels. Prices have fallen from near $115 in May. BNP Paribas said in his report that the market has gone through a shift with the emergence of talk of double dip recession.

A major reason for the slump in oil prices is the economic austerity measures adopted by European countries. Oil has fallen recently along with stocks because of concern about the global economy. France gets 2.5% of its global production from Libya, is seen as a particular threat due to France leading role in international community to the rebel cause.

World economic growth has been revised down to 3.7%  in 2011 to 4.0% in 2012.this was mainly due to revision in the US forecast, which was cut to 1.8% from 2.5% in 2011 and 2.3% from 2.9% in 2012.

Product market sentiment showed a moderate recovery last month, with product cracks moving upwards across the globe supported by stronger Latin American import requirement. Gasoline demand has been weaker then expected in the Atlantic basin. Economies’ worries have affected the oil demand in the US; the aggregate oil demand will see a further decline this year.

Markets continue to monitor developments in Libya in order to asses how quickly oil production in the country would return to pre-war levels.

Oil fluctuates while Economies Watch Out

August 24, 2011: Market analysts are closely watching the price of crude oil because of the uncertainty associated with it brings frequent fluctuations. American petroleum institute said that crude inventories fell 3.3 million barrels last week. The energy information arm of McGraw hill Cos. had predicted an increase of 2.0 million barrels.

Oil prices rose on Tuesday as traders monitored the crisis in oil rich Libya, with rebels claiming victory and capturing Moamer kadhafi’s heavily fortified compound. Today oil prices hovered above $85 a barrel in Asia after a U.S supply report gave mixed signs about demand for crude.  

Banks had lowered their average crude price forecast- to $92 for the third quarter and $98 for the fourth quarter. Lipow said that The European refineries have struggled to make up for the production loss despite an increase from Saudi Arabia. As a result, European market should see the first and most significant drops in oil prices.

As oil is traded in dollars it tends to rise as the greenback weakens and makes crude less expensive for investors holding foreign money. The dollar dropped after the report that manufacturing activity in China and Europe was better than expected.

Benchmark West Texas Intermediate crude, for October delivery witnessed a rise by $1.67% or 2%, to $86.9 per barrel in afternoon trading in New York.  

 A report by the Goldman Sacs Group Inc. points to seriously “tight supplies” in the year 2012, and laments on the fact that not much can be done about this, because increasing production from countries like Saudi Arabia also seems rather difficult.

Oil Markets react as battle rages in Libya

August 23^rd, 2011: Libyan rebels have overthrown successfully Moammar Gadhafi, a long time dictator; sparking analyst remarks immediately, that say the oil will trickle back in the market in few more months. But to return back substantially might take few years.

This event pushed benchmark oil up for upcoming October delivery by $1.34%, reaching $85.76 in the New York Mercantile Exchange’s electronic trading. London witnessed a 29 cents increase in Brent Crude thus reaching to $108.65 on ICE futures exchange.

The oil infrastructure in Libya is massively damaged leading to a sharp fall in crude output from 1.5 billion barrels a day to 60,000 barrels. A recent report by Goldman Sachs apprehends Libya’s oil production to average to 250,000 barrels a day by the coming year.

If the production of crude increases in Libya, analysts expect Brent to drop back below $100 and reach $85 by the year 2012. However with Brent crude prices plummeting further it is rather unlikely that there would be markets flooded with oil.

In Nymex trading for October contracts, heating oil rose by 2 cents and climbed to $2.93 per gallon whereas gasoline futures were at $2.71 per gallon. Brent is more affected by the Libyan crisis as compared to the WTI. The West Texas Intermediate, light sweet crude increased by $ 1.29 cents for October delivery.

Thus a Manoucher takin, a senior petroleum analyst at the Center for Global Energy Studies in London says, the return of Libyan oil production will in fact be a gradual process.

Oil finishes at a low for August 3rd Week, 2011

With enough speculations and prayers, oil this week had but one trend, to fall. The end of the week saw fear of another US recession on its way, taking the oil to about 4 percent lower, for the last week. Nevertheless Benchmark Crude maintained its last year’s lowest point of $71.63 a barrel last August. Benchmark West Texas International crude for delivery this September fell by 12 percent and finished at $82.26 a barrel on the Mercantile Exchange New York.

Since April, this trend is persistent, and might offer some respite at the gas pumps, disregarding other factors however. Apprehending an uncertain global economy, stocks for major indexes also plummeted by more than 1 percent.

The dwindling Crude got a partner on Friday with dollar weakening further and creating a new record against the Japanese Yen since World War II. A weak dollar will however make it easier for traders to buy commodities and oil, since all of them are priced in dollars.

The current trend of the commodities markets, especially oil, has instigated speculations that the year 2012 will experience a tighter oil supply. The IEA’s announcement in June to release strategic oil reserves to the markets, such a measure however is typical in times of crisis or in the times of war.

A report by the Goldman Sachs Group Inc. points to seriously “tight supplies” in the year 2012, and laments on the fact that not much can be done about this, because increasing production from countries like Saudi Arabia also seems rather difficult.

The world population is rising every minute, and thus a simple fact that comes to most minds and foreseen by a UN report earlier this year is: higher demands, but sadly supplies would go on dwindling further.

Oil Prices Plummet further raising concerns

August 18, 2011: The end of the third week of August saw oil prices plummeting further to touch a $81 a barrel in Asian Markets, this was parked off by a growing concern that the slowing down of the global economy would further undermine the crude oil’s demand in the market. 

The weakening US economy was the prime reason behind the tumbling markets. There are apprehensions that the US economy is heading towards recession, has resulted in a steep fall in the commodities especially oil. Crude oil sales dropped to an all time low since last two years, in Philadelphia- area manufacturing. 

Investors’ sentiments further played on with the concerns of growing EU’s debts and that the European banks may have difficulties in funding. Experts are apprehending further falls in the commodity markets, due to newer financial shocks. The world economy seems to be tumbling without little signs of recovery until the oil prices weaken further. 

London witnessed a fall in Brent crude by $1.53, reaching 4105.49 a barrel, as listed in ICE Futures exchange. US Crude CLc1 fell by 2%, arriving at stalling $79.17 a barrel, averaging down to an altogether of 16% for this entire month so far, a record fall since December 2008.

In the midst of falling oil prices, safer assets like gold witnessed a record all time high since two years. Gold however would ride the high tide, with more disappointments emanating from the markets. 

The markets especially crude tripping further down makes, Tony Nuanan, manager of risk at Mitsubishi Corp Japan, remark that the downfall could plunge further and the overall weak economy shows little but symptoms of a bullish oil run.

According to Capital Economics, Brent is expected to fall and reach $85 during the coming year. however the optimistic view forecasts a stronger demand for crude in US in the coming phase.

Crude oil falls

Crude oil prices plunged from a recent two day high in New York, apprehending a drop in oil demands due to the weakening of the US economy. The US presently is the highest consumer of oil. Falling crude oil also took along with it the future markets by about .6%. 

This has furthered the growing concerns about the improper health of the economies of the US and the European countries. There are modest developments expected in the same until the end of this year. Moreover Crude oil is being apprehended to fluctuate within a range of $80 to $100 in this span of time. 

This faltering in the crude oil trade and the subsequent fall in the equities markets, particularly of Asian markets, is a sign of a momentary turbulence though. The economies of US as well as of European countries have been striving hard to control such fluctuations and the speculations associated with it. The market seemingly however has two choices to fall or to rise, and a few days fall will definitely better the situation on the third day. 

Crude oil’s delivery for this September has dropped by 56 cents to $87.02 per barrel in the New York’s Mercantile Exchange’s electronic trading.

Further US crude oil inventories have witnessed a rise to 354 million in the week that ended on August 12^th as per the reports prepared by the Energy Department.  The nation’s Strategic Petroleum Reserve is letting out huge stocks in close coordination with the Paris based International Energy Agency. 

An overall failure of crude oil to breach chart resistance is a clear implication of prices to decline further.

Emergence Of Russia As Safest Bet

In spite of being one of the largest producers of crude oil, Russia was never a safe option to import crude oil for western countries. Political nature of Russia has refrained western countries from importing. But the time has changed. Gone are the days of cold war when state owned oil sector was used as a weapon against capitalist western world. Of late the situation has changed drastically and Russian Federation contributes more than sixty percent of energy requirement of European Union. The recent turmoil of Arab world has bound western world to think of Russia as a safer bet.

 Revolution of Libya has put many European countries in precarious situation. Country like Italy and Ireland are heavily dependent on Libyan oil. Italy singlehandedly import twenty eight percent of Libyan production. The twelfth largest producer of crude oil, Libya singlehandedly contributes two percent of world wide production. Not only Libya, but also Egypt and Tunisia, play a very pivotal role in the production of crude oil. The growing unrest of these Arab countries has made oil market more unstable than ever before.

Economical superpower like England, France was never even close to the self sufficiency in terms of crude oil production. They mainly supply their huge demand from Arab countries. But, the recent developments of Arab world have put them in an awkward situation. They are in search of a more reliable option. This quest for safer bet has corroborated to the growing importance of Russia as a safer and risk free option.

Russia has also responded to this crisis positively as honorable Prime Minister Vladimir Putin himself has taken measures to end the monopoly of Gazprom in energy sector. This positive attitude of Kremlin has supplied some fresh oxygen to Western world, as they consider Gazprom as a fragment of cold war.

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Japan- Forced To Refurbish Energy Strategy

 New decade seems to be a very challenging one for Japan. China, the emerging super power has displaced Japan from second position in world economy. Constant recession of Japan has helped China to overtake her. Once world’s largest economy, Japan has gone through a very rough time since the beginning of twenty first century.   Fukushima Daiichi disaster has added a new degree in her misery. Apart from the loss of countless innocent population from the joint strike of earthquake and tsunami, Japan is probably going to face the largest economic disaster. This disaster has also made Japan to rethink about their energy policy, as instead of helping them, their current energy policy has added heavily to their misery during crisis. This new energy policy of Japan is certainly going to play a major impact in international oil market. As the decision of closing down nuclear plants, is going to make Japan more and more dependent on crude oil than ever in last four decades. This is certainly going to make an upward shift in the international demand of crude oil at the time when the supply has shown a negative shift due to the turmoil of Arab world.

Being an extreme low reservoir of natural resources, Japan was historically dependent on foreign energy source. Being driven by the idea of controlling the world of energy, Japan has indulged herself into Second World War. But, the disastrous end result has made them to think otherwise. Moreover Japan has observed an economical revolution in post war phase. As a result they have started depending heavily on nuclear energy. With the aid of technological advancement they have reduced their dependency on oil from sixty six percentages to mere ten percentages. They have successfully met thirty percent of their energy requirement through nuclear option.

But, Daiichi disaster has made them to reform their energy policy once again.  Japan is going to bank on renewable energy options like bio fuels, wind, hydro power and solar instead of nuclear energy in long term.  It is expected that by 2050 Japan will be able to meet sixty six percent of energy requirement through these options. But, to deal with recent crisis, Japan has to be more dependent on crude oil and gas as temporary alternatives, as they have decided to close down nuclear plants. This is certainly going to increase the demand of crude oil and gas in international market and create an impact.


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