Commodity Blog

Posts Tagged ‘OPEC’

Crude oil gained today on concerns about supply from Iran. The exports from Iran, the second biggest producer in OPEC, may be disrupted as the United States is going to implement additional sanctions against the country. The speculation that the US inventories continued to decline bolstered crude further.

Earlier, oil declined as Kim Jong Il, the leader of North Korea, died, causing worries that a possible internal power-struggle may lead to deteriorating relationship with South Korea. The continuing problems in Europe also damp demand for oil.

January contract for crude for delivery (which expires today) rose $0.7 to $94.58 per barrel in electronic trading on NYMEX. February futures for Brent oil advanced $0.4 (0.4 percent) to $104.04 per barrel on ICE.

Crude oil went down to the five-week low and Brent dropped to the two-month minimum as the concerns for Europe intensified, fueling fears that the global economic growth would falter. The yield on the Italian and Spanish bonds increased. Germany opposed the idea to boost the European Stability Mechanism (Europe’s bailout fund). The indecisiveness of the European politician continues to hurt markets.

There were other reasons for the drop of oil. OPEC increased its production ceiling for the first time in three years. China’s manufacturing continued to decline this month, albeit with slower pace. China’s Manufacturing PMI fell to 49.0 in December from 47.7 in November, according to the flash HSBC/Markit estimate.

January futures for crude oil rose $0.01 to $94.96 per barrel, in electronic trading on NYMEX, following yesterday’s 5.2 percent drop to $94.95, the lowest closing price since November 4. Brent traded at $106.14 per barrel as of 4:33 GMT today on ICE after it tumbled during yesterday’s trading session from $109.47 to $104.83.

Crude oil rallied today on the good news from Europe and the United States. Earlier, crude dropped on the speculation that the US inventories increased last week.

Italy auctioned its debt today and the results were good, nothing like the disastrous outcome of the German auction. The confidence of the US consumers improved as was shown by the index that rose from 40.9 in October to 56.0 in November.

The Organization of Petroleum Exporting Countries said that it’s going to keep the quotas at the current level. The protests in Iran may lead to disruption of supply.

January futures for crude oil delivery gained $1.58 to $99.79 per barrel on NYMEX. Brent oil was up from $108.52 to $110.44 per barrel as of 23:02 GMT today on ICE.

Crude oil prices started a rally on August 2010 and were rising till May 2011, when the rally has failed. Since then the prices were extremely volatile as market sentiment shifted, making traders unsure about future performance of the commodity.

In the short-term, the drive for oil should be the same as for other commodities: Europe and its debt crisis. The persisting problems of the European Union have a negative impact on oil and will likely continue to do so for some time. Market sentiment improved by the end of the week, but, unless some major positive event would occur, it’s not likely traders would retain optimism for long.

In the longer-term, the situation in Middle East and North Africa adds its influence to that of Europe. The ongoing political turmoil should prove positive for oil prices as it’s threatening supply. Libya draws special attention of market participants as it may put downward pressure as its output recovers, but may also drive the prices higher in case the country fails to sufficiently increase production.

US Energy Information Administration estimated that the global consumption of oil will grow from its record-high level of 87.1 million barrels per day in 2010 to 88.2 million barrels per day in 2011 and 89.6 million barrels per day in 2012. The non-OPEC output will rise by 0.4 million barrels per day in 2011 and 1.1 million barrels per day in 2012, while OPEC production will remain largely flat, according to the estimates of the EIA.

The EIA revised its price outlook for the WTI crude oil slightly up to the average of $100 per barrel in 2011 and 2012. Traders should be cautious as volatility remains extremely strong and fundamentals currently aren’t particularly supportive for crude.

Crude oil advanced to the highest price this month after the Organization of Petroleum Exporting Countries members didn’t reached agreement about the production targets and as the US trade balance deficit unexpectedly shrank. The US trade balance posted a deficit of $43.7 billion in April, the smallest deficit since December. July contract for crude oil delivery rose $0.12 to $102.05 per barrel in electronic trading on NYMEX.

Gold gained on the speculation that the European sovereign-debt crisis may worsen. The European Central Bank maintained its key interest rate unchanged, while the trade balance of Germany and France worsened. Spot price was $1,543.88 per ounce, rising 0.1 percent over the week.

Copper went down on concern that demand will wane as central banks worldwide will increase interest rates to battle inflation. The industrial metal was softer as manufacturing declined in the US and China, two biggest consumers in the world. July contract for delivery of copper fell $0.001 to $4.1075 per pound by 13:16 on COMEX.

Crude oil rose today as the meeting of the Organization of Petroleum Exporting Countries result in disagreement of its members about production quotas. Earlier crude fell on the speculation that the OPEC will increase output.

Ali Al-Naimi, Oil Minister of Saudi Arabia, which is the biggest producer of oil, said that his country, together with Kuwait, Qatar and the United Arab Emirates, is ready to supply more crude to markets. Other members were reluctant to support this idea, it seems. Analysts believe that it means some OPEC members have low spare capacity.

Ali Al-Naimi said:

It was one of the worst meetings we’ve ever had. We were unable to reach an agreement.

July contract for crude oil delivery jumped $1.65 to $100.74 per barrel on NYMEX, the highest price since May 31. July for delivery Brent crude rose $1.07 (0.9 percent) to $117.85 per barrel on ICE, reaching the highest level since May 4.

Copper gained on the speculation that supply will decline and as weaker dollar boosted prices of commodities. Contract for delivery of copper in three months went up 0.2 percent to $9,157.50 on LME

Gold metals fell as the euro gained, reducing demand for safer assets, after the European Central Bank supported plan for rollover of the Greek bonds. August futures for delivery of gold slipped $3.20 (0.2 percent) to $1,544 on COMEX. July silver futures advanced $0.264 (0.7 percent) to $37.046 per ounce.

Oil jumped on the speculation that increasing production quotas in the Organization of Petroleum Exporting Countries will reduce spare capacity. The US Energy Department revised its forecast for the global usage of oil this year to 88.43 million barrels per day from 88.08 million in May. July delivery for crude oil traded at $99.09 per barrel on NYMEX. July futures for Brent crude delivery rose $2.30 (2 percent) to $116.78 per barrel on ICE.

Crude oil fell on the speculation that the Organization of the Petroleum Exporting Countries will increase its output quotas. Some analysts predict that OPEC will increase its production by 2.5 million barrels per day from 24.845 million. Other experts believe that the output will remain the same and prices will surge. July futures for delivery of crude oil fell $0.68 to $98.33 per barrel in electronic trading on NYMEX.

Gold gained on worries that the debt situation in Europe, and Greece in particular, may worsen. Greece’s agreed to introduce more austerity measures to receive another portion of the previously agreed bailout. Yet European Union Economic and Monetary Affairs Commissioner Olli Rehn said yesterday that Greece “is facing a default unless there is help”. Gold for immediate delivery traded at $1,543.40 per ounce after rising 0.2 percent yesterday.

Crude oil rose today for the second day as Saudi Arabia reduced its production. The Banque Saudi Fransi reported that the biggest oil producer in the Organization of Petroleum Exporting Countries cut output by 300,000 barrels per day. May contract for crude oil delivery gained $1 to $108.11 per barrel on NYMEX.

Precious metals, including gold and silver, jumped on the speculation that the high prices for raw materials and the low interest rates will increase inflation pressure, boosting demand for the metals as an inflation hedge. June futures for gold delivery advanced as much as $16.80 (1.2 percent) to $1,472.40 as of 13:42 on COMEX. May futures for silver delivery went up $1.427 (3.5 percent) to $41.664 per ounce. June futures for palladium delivery added $8.95 (1.2 percent) to $774.25 per ounce on NYMEX. July futures for platinum delivery rose $18.40 (1 percent) to $1,795.60 per ounce.

The tensions in Libya and the concern that the unrest will spread to other countries of the region still support oil and gold. The clashes between the rebels and the government forces intensified in Libya. The United Nations estimated that 1,000 people had died as of February 26 since the uprising in Libya.

In the meantime, the unrest rises in Saudi Arabia, the major exporter in the Organization of Petroleum Exporting Countries. The protests are planned on March 11 and March 20, increasing the concern about oil supply. The accelerating inflation supports gold.

April delivery for crude oil gained $1.02 to $105.44 per barrel on NYMEX, the highest price since September 26, 2008. April futures for gold delivery added $5.90 (0.4 percent) to $1,434.50 as of 13:32 on COMEX.