Hasan Selim Ozertem Eurasia Expert USAK/JTW printable version send your friend message to author add comment ()

Sunday, 25 February 2007

This commentary is from USAK's Energy Review Newsletter
http://www.turkishweekly.net/energyreview/TurkishWeekly-EnergyReview8.pdf
To subscribe email to energyreview@turkishweekly.net

This week the indicators were so volatile that the oil prices tend to decline in the beginning of the week but later the oil prices jumped over the physiological barrier of $60.

This week as expected the oil prices began to decrease both in Brent and WTI. However on Wednesday the energy department announced a decrease in stocks of distillate fuel and gasoline and the announced numbers were more than expected. Even though the stocks of crude oil, gasoline and heating oil was well above the 5 year average in the US two weeks ago (February, 9) these stocks drastically decreased on February, 16. The decrease in gasoline stocks was about 3.04 million barrels and the stocks declined 5.04 million barrels for the distillate fuel.


Source: Energy Information Administration (EIA)

After this information oil prices have changed their direction and began to rise. Both Brent and WTI prices were above the $60 at the end of the week. The change between the Monday and Friday prices was 6% for Brent and 1.8% for WTI.

Moreover, this week the geopolitical tension increased in the Middle East once again. On 23rd December the Security Council set a 60-day deadline for Iran to end its enrichment program, and put sanctions on Iran's trade in sensitive nuclear and missile technology. However, on Thursday International Atomic Energy Agency (IAEA) submitted a report to the Council and stated that Iran has expanded its uranium enrichment program.

After the report it was announced that the five permanent members of the Council and Germany will convene in London on Monday to discuss the issue. Meanwhile, Iranian President Ahmedinejad said in one of its speeches that “The Iranian people will continue their path of progress and advancement with resolve and steadfastness, and will never be cowed by Western threats and intimidation,”

The outcome of London meeting would be important on Iran crisis. But it should be noted that Russia and China are not in favor of tough sanctions due to their tight trade relations with Iran.

On the other hand, although the tension increases in the Middle East it is claimed by the analysts that the supply of Iranian oil would not be affected since they have economic problems and need the money that is coming from the oil.



Source: Financial Times

For the important indicators it can be said that OPEC seems to be content with level of prices for now and Saudi Petroleum Minister Ali al-Naimi’s statements proves this in a way. Last week he said that he did not expect a further reduction decision to be taken in OPEC’s meeting in Vienna. For the geopolitical situation; even though it is not likely but a further tough sanction decision that would be decided by the Security Council about Iran might affect negatively the relatively stable situation in the Middle East. In addition, it should be noted that the winter is not over yet and the stocks are falling in the US. Temperatures that would be below the seasonal averages also can affect negatively the oil prices.

For the oil prices next week; according to a Bloomberg’s survey 17 of 39 analysts expect a rise while 16 of them expect a fall in prices.

Until next week;

For your comments;
hozertem@gmail.com

Hasan Selim Ozertem
USAK’s Energy Expert

References:

• Shenk, M. Crude Oil May Rise on Decline in U.S. Fuel Supplies (Update 2). Retrieved on 23 February 2007 on; http://www.bloomberg.com/apps/news?pid=20602013&sid=aR6BZHyLeAtY&refer=commodity_futures
• Shenk, M. Crude Oil Falls on Ample U.S. Supply, Continued Iranian Exports. Retrieved on 23 February 2007 on;


This commentary is from USAK's Energy Review Newsletter
http://www.turkishweekly.net/energyreview/TurkishWeekly-EnergyReview8.pdf
To subscribe email to energyreview@turkishweekly.net