‏A Look at the Oil Markets
By: Mohamed Al Shatti
Manager of Cooperation and Follow –up
CEO's Office

Average prices of Brent Signal Crude Oil reached for the first ten days of September to $116 per barrel against $108 per barrel for Dubai Crude Oil, i.e. the differences between prices of both signal oils reached to $8 per barrel.

Some factors contributed to support the prices of Crude Oil during the last period, including the expectations of decline of crude oil stocks in USA, hurricanes that occurs in USA, as the hurricanes may cause disorder especially in refineries and oil platforms in the Mexican Gulf, optimum on new support package for US economy, expectations of a slowdown in the return of Libyan oil to the oil market, weakness of U.S Dollar against the main currencies, the return of many refineries from maintenance programs in many areas, high demand for oil and the continued building of crude oil strategic reserve in China.

At a related level and amongst the negative economic risks, some observers think that some OPEC's countries, such as Kuwait, KSA and UAE may be ready to return to production levels for their countries that were in the middle of 2010 so as to maintain the balance of oil market and the stability of oil prices at one hundred dollars per barrel of Brent Signal Oil, which supports the optimum that there is enough flexibility to accommodate double of 1.5% to 2% of the economic expectations.

After a significant slowdown in refining projects during 2009 and 2010, expansion for this year in the plans all over the world and the return to more typical growth pattern, as this addition is estimated during 2011 at 1.46 million bpd of Crude Oil refining capacity, followed by addition of refining capacity of 2.0 million bpd in 2012. In this context, a study made by JP Morgan Bank expects that the return of refining capacity of Japan and Taiwan may synchronize with the date of operating new refining capacities and improving their level in India and China that reaches in total to 1.7 million bpd by March 2012. This leads to the assumption that refineries operating rates are lower, particularly in Asia.

Market development are, in general and in particular, in agreement with the global economy performance either negatively or positively and the differences between Brent Crude Oil and West-Texas Intermediate Crude Oil are still wide to a record of $26 per barrel, as it is derived from the strength in Brent from the basics of supply, against the weakness in prices of West-Texas Intermediate Crude Oil. In contrary to the performance of U.S Stock Market, the prices of Brent Crude Oil have already recovered to close levels by the end of July 2011 and the structure of prices of most global crude oils converted to what is so-known as Beckordychen, which means that the current prices are more than the future months and also mains the balance of oil market in the present, the demand against the supply. This supports the current prices levels and doesn't encourage the building of oil reserve as is the case, when the structure of prices is Kontanju, as the future prices in the coming months are more than the current ones to cover the cost of storage.

In the light of the positive developments in Libya, the attention of the international and Chinese companies moves to the sector of exploration, drilling and production to develop investment opportunities with the Libyan government in order to ensure a continuous resource of the Libyan oil which is known by its high quality. It is worth mentioning that Libya exported about 11% of Crude Oil sales to China and at a related level, the sources indicate to an expected increase in production by OPEC's countries whether Libya, Nigeria, Angola and Iraq during the last months of 2011.