Oil steadies on U.S economic recovery despite Libya, Syria and Yemen
SHARE
, / 315 1
Oil steadies on U.S economic recovery despite Libya, Syria and Yemen

Oil steadies on U.S economic recovery despite Libya, Syria and Yemen

With official data released on Friday regarding U.S growth, demonstrating that the world’s largest oil consumer had recovered much better than had previously been expected,  oil prices steadied after an entire week of nervous trading conditions across global commodities and equities markets.

A report released by the Commerce Department in the fourth quarter of 2010 had estimated US economic growth for the first quarter of 2011 at 2.8%. The final report released on Friday revealed a higher than expected recovery rate with this figure getting revised to 3.1%.

Brent crude in London gained 13 cents, settling at $115.60 per barrel, while light sweet crude for May delivery fell 15 cents to settle at $105.60 per barrel on the New York Mercantile Exchange.

Steady Oil despite Libya

According to estimates by the International Energy Agency, 1.69 million barrels of oil was being produced by oil-rich Libya before unrest broke out. This has gone down to an almost negligible level now.

While ongoing unrest in Libya and Gaddafi’s relentless stance continue to make oil traders nervous, what has clearly helped steady oil prices, alongwith U.S economic recovery reports, is the fact that the supply of oil and natural gas from Yemen has not stopped completely despite an attack that shut down a pipeline carrying crude from the country's western fields. Yemen only accounts for a small share of global oil exports, but because of its strategic location near Saudi Arabia, a total shut-down of oil and gas supply from Yemen could’ve significantly increased anxiety levels in the market.

Oil deals over the last week have been carried out against a backdrop of anti-government protests that have spread across the Middle East and North Africa, the most recent being uprisings in Yemen, Syria and Bahrain following similar movements related to leaders in Egypt and Tunisia getting ousted.

Hence, reports of a better-than-expected U.S economic recovery have played a crucial role in steadying oil prices. Like VTB Capital analyst Andrey Kryuchenkov said "The risk premium from the ongoing Libya's fallout and jitters over Yemen is already priced in".

The bottomline?

Like Ed Meir, senior commodities analyst at MF Global in New York said on Friday, "… on balance we are not short of physical supply. Libya's outage due to the fighting there has been offset by Saudi production and the demand in Japan is down. So there's no real tightness in supply at the moment."

He further added “We've had a good run this week and for today we are seeing some pre-weekend profit-taking. While there is a lot of turmoil in the Middle East, none of the ongoing unrest affects big oil producers," said.

However, forecasts by J.P. Morgan analysts headed by Lawrence Eagles depict definite price rises for Brent and U.S crude, given the expected summer driving demand boost alongwith continuing supply uncertainty in the Middle East.

"So long as ongoing problems in the Middle East continue to elevate risks of a further supply disruption, there is a strong likelihood of a price spike in the second quarter as the market demands additional oil to meet summer demand," J.P. Morgan said in a research note.

image source: http://www.dominionpaper.ca

Author
Carrie Ann is Editor-in-Chief at Industry Leaders Magazine, based in Las Vegas. Carrie covers technology, trends, marketing, brands, productivity, and leadership. When she isn’t writing she prefers reading. She loves reading books and articles on business, economics, corporate law, luxury products, artificial intelligence, and latest technology. She’s keen on political discussions and shares an undying passion for gadgets. Follow Carrie Ann on Twitter, Facebook & Google.

One Comment

Register today to get full access to:

All articles | Magazine archives | Livestream events | Comments

PASSWORD RESET


Register today to get full access to:

All articles | Magazine archives | Livestream events | Comments

LOGIN