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By: Mohammad Al-Shatti
Manager Coordination & Follow-Up
CEO
Although the prices of Brent mix signal crude oil have witnessed a degree of volatility since the beginning of 2011 and increased by 25 $ per barrel since mid-February, but during the month of April 2011, the prices moved within the price range of 120-125 $ per barrel and that enhanced the point of view saying taht the price risks in oil market became more balanced, with the risk that the weakness in the demand may exceed in its effects the decline in the supplies with instability in North Africa and the Middle East.
The decline in Libyan production along with the continuing decline in the North Sea may affect the supply and support the values of light oils in North America and Russia and may maintain the upward trend of price of Brent mix signal crude oil.
The continue balance of the market is also likely to support the high prices of Brent mix crude oil at or over the current levels in 2012, but there is a consensus that the market factors in 2011 and 2012 differ from 2008. In terms of presidential elections in Nigeria, where the end of the elections with the winning of Goodluck Jonathan in the presidential elections in Nigeria, this may mean the relative stability of this factor in affecting on the oil market through the Nigerian oil supplies to the market as it was in the previous experiences.
In addition, the factors that play in the market support is the impression of the associates decreases in the ability of OPEC productive capacity, that means more suspension in the supplies increases the possibilities of increasing the prices in upward trend and that also means the customers will trend to consider other strategies and options to mitigate these risks. So the surplus productive capacity will witness continuous increase by the of 2011, if the demand continued at its high rates at 1.5 million bpd annually. The International Energy Agency estimates the level of global demand for oil during the second half of 2011 at 90 million bpd that represents 4.5 million bpd that is the highest before the economic recession in late 2009.
The profit margins of refining operations have improved in recent times with the approach of the high demand on a seasonal basis in the United States of America. As for Asia, the expectations remain that the refining margins will remain under pressure due to the great increase in refining capacity in Asia.
On the other hand, the continued high level of USA inventory demonstrates that the situations aren’t similar to 2008, so that may mean that the crude oil market may be subject to correction during the coming weeks, according to figures of U.S. Energy Information Administration, for withdrawals by 7 million barrels of U.S. inventory of oil and petroleum products bringing the inventory level to 29 million barrels less than the previous year.
In this context, KSA Minister of Oil declared that Saudi Arabia has decreased its oil production from 9.3 million bpd in February to 8.3 million bpd in March indicating to the insufficiency of demand for oil. It is likely that the lack of demand for the Japanese refineries after the earthquake and tsunami suspended about 600 thousands bpd of the refining capacity in March 2011. The observers expected that Saudi production will be higher than the 8.3 million bpd in the coming months and some sources quoted that the Saudi production will reach to 9.5 million bpd in May 2011.
Some observers say that Saudi Arabia may need to maintain the production level near to 9 million bpd or slightly higher and this intention explains the acceleration of developing the production of 900 thousands bpd from Manefa field for heavy oil. The same sources say that the natural decline rate in the new fields is 2% while it is 4% in the old fields.
In terms of demand, the demand for oil in china still helps the enhancement of global levels of demand for oil, as the demand reached in March 2011 to about 9.28 million bpd or by increase rate of 9.54% in comparison with the same period of the last year. The rate of owning the cares in china grows continuously and there are some expectations that it exceeds the expectations with 60% that were performed a few years ago. The total imports of crude oil reached to 5.16 million bpd or increase with rate of 11.9% in comparison with the same period that the previous year as the imports reached to 4.98 million bpd. The Saudi exports increased to million bpd in March 2011 from level of 761 thousands bpd in 2010, with note that the imports of crude oil from Libya to China have decreased from 341 thousands bpd in March 2010 to reach to 191 thousands bpd in March 2011.
The International Energy Agency expects that the demand for oil in China will increase with an amount of 600 thousands bpd in 2011 to reach to 10 million bpd and the demand in 2010 has increased in 2010 with an amount of million bpd according to the agency estimations.
China has converted to exporter of the petroleum products especially the gas oil (and Diesel) and jet fuels for the first time from November 2010 and August 2010 respectively and the lack of Japanese exports in the market as result of the tsunami disaster has participated in this trend.
Some sources estimate that the operating ate of the refineries in Japan exceeds 400 thousands barrel that is less that the operating rate in April 2010 and that is the least level reached by refineries operating capacity in Japan in average for five years and that led to building in the oil inventory greatly.
Due to China's Importance, the GCC countries have began investments for building refineries petrochemical complex in China forming safe outlets for GCC oils in a promising market within strategic partnerships with the international and national companies, including ARMCO (two refineries, the first Viojan with total capacity of 240 thousands bpd that began in 2009 and Greece refinery with total capacity of 200 thousands bpd), KPC (total capacity of 300 thousands bpd) and Qatar oil company.
Barclays Bank indicates in one of bulletins periodic, that the reaction of US customer of local gasoline princes in US market wasn’t as it was in 2008, when the prices reached to high levels at 4$ per American gallon. The consumption has decreased directly, but in the current year the demand is still, however, high as the consumption of gasoline increased with rate of 1.3% in comparison with the last year. The total prices of oil consumption in USA reached to 19.3 million bpd that represents increase with rate of 2.3% than the same period in the previous year.
We must emphasize on the warnings from some banks and observers, that high prices of energy and food includes an indicator for inflation in the developing countries that leads, at the end, to slowing the recovery phase in the performance of the global economy. |