| Oil Market signal from Price gap |
| Friday, 04 March 2011 10:35 |
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Amid the unpredictability over oil production levels and export volume in Lybia due to the turmoil, over half of 1.6million barrels of Lybian oil production has been shut down according to IEA(International Energy Agency) resource. As the Egyptian situation is expected to cause serious problems to Europe area’s oil supply, the price of Brent crude oil has risen up more sensitively than WTI’s. On the other hand, WTI moved insensitivley due to US labor market’s unclear recovery signals after financial crisis. Therefore, the price gap has widened to the maximum of 15$/bbl during past 2months.
The movement of ICE WTI-Brent Crude Oil Bullet 11 April(Bloomberg Ticker : BYAH1) which shows the price gap between each crude oil has stopped its widening trend and it showed a meaningful movement yesterday.
Amid the unpredictability over oil production levels and export volume in Lybia due to the turmoil, over half of 1.6million barrels of Lybian oil production has been shut down according to IEA(International Energy Agency) resource.
As the Egyptian situation is expected to cause serious problems to Europe area’s oil supply, the price of Brent crude oil has risen up more sensitively than WTI’s. On the other hand, WTI moved insensitivley due to US labor market’s unclear recovery signals after financial crisis. Therefore, the price gap has widened to the maximum of 15$/bbl during past 2months. The movement of ICE WTI-Brent Crude Oil Bullet 11 April(Bloomberg Ticker : BYAH1) which shows the price gap between each crude oil has stopped its widening trend and it showed a meaningful movement yesterday.  In general case, the widening of each crude oil price is a good indicator that oil market participants are considering local issues more seriously.
Yesterday’s market signal might indicate that factors for oil price movement may change from local issues to fundamental issues.
Actually, yesterday’s world principal equity indices bounded when gold price and Swiss Francs tumbled.
In addition to encouraging US economic indicators such as ISM Index and employment gauge, welcome news from Venezuelan President Hugo Chavez that Qaddafi agreed to the mediation to resolve the conflict has just been released in time.
On the basis of these series of signals, the soaring of crude oil price will remain calm in the short term.
However, we have to keep in mind that the pressure on the soaring crude oil price is still remaining after the resolution of Lybian issue. As US economic conditions are getting better and global liquidity is brimming, there will be growing demand for more energy resources.
Written By:
Jae Young
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