Producing for about 40 percent of the world’s oil, this week OPEC members made their ordinary meeting in Vienna on Thursday. As expected no new decisions were taken to cut oil supply. On the press release it was stated that the volatility for the oil markets continues and for this reason the Conference decided to monitor closely the market developments “to ascertain that oil market stability is achieved and that global economic growth is sustained.”
This was an expected outcome since before the Conference to convene many of the member states of OPEC said that they were happy with oil prices and there was no need for further production cuts. This decision perceived positively by the markets and crude oil prices slightly decreased in future markets.
For the market stability OPEC decided to cut their daily output in total 1.7 million barrels after their two previous meetings in Doha and Abuja.
Oil Prices Source: Financial Times
On the other hand the oil prices did not change so much in the spot markets. However, when analyzed closely it can be seen that WTI oil lost its superiority over Brent oil and became $57.24 on Friday. On the other had the closure price for Brent was $60.88. According to analysts the reason of the weakness in WTI is that there is so much crude oil in the Cushing region.
Stocks in the US Source: Energy Information Administration
Oil stocks in the US (except crude oil) continued to decline in the second week of March too. While gasoline stocks decreasing by 2.4 million barrels, distillate oil stocks declined 2.7 million barrels in total. It was the seventh week of decrease for heating oil. On the other hand crude oil stocks increased 1.2 million barrels.
Heating Oil Prices and Stocks Source: Energy Information Administration
The negative relation between heating oil stocks and heating oil prices seems broken for this week. Even though the stocks decreased 2.7 million barrels the prices decreased 0,1 cents. It should be recalled that we are living the last phase of winter and this indicator would not be as much important as it was for this season of the year.
Moreover, this week members of the Security Council continued to seek for a compromising point for the sanctions that would be imposed to Iran. Finally a new draft has been agreed by the 5 permanent members of the Council and Germany. The new draft was sent to other 10 non-permanent members by the British ambassador (BBC). Last December the Council unanimously voted to impose a limited sanctions package to Iran. However, the new package includes a more comprehensive economic penalties and arms embargo.
After this development Iran’s President Ahmedinejad has requested to address to UN council in Washington. Iran still claims that the uranium enrichment programme is only for peaceful means.
These developments should be monitored closely. Since as known geopolitical disputes negatively affects oil prices.
Moreover, Bloomberg’s analyst Mark Shenk claims that crude oil may rise next week due to increasing demand and decline in gasoline stocks due to problems in refineries in the US. According to a Bloomberg’s Survey this week 21 of the 43 analysts expect prices to increase and 13 of them expects oil prices to decrease.
References: • Shenk, M. Crude Oil May Rise as U.S. Gasoline Supplies Decline. Retrieved from: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAm3lG_eFgGk on 18 March 2007
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Journal of Turkish Weekly (JTW)
USAK House,
Ayten Sok. No:21
Mebusevleri, Tandogan, Ankara, Turkey
