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Crude oil prices fell both for WTI and Brent oil when compared to last week’s market closure. This week prices started with a downward trend in oil markets, but the prices slightly increased on Friday due to worries about elections that was made in Nigeria this weekend; Africa’s biggest oil producer.

For about one month everybody is talking about gasoline stocks and gasoline production due to beginning of driving-season. Gasoline production and stock levels are important indicators in this context when compared to the role of distillate oil in the winter.

According to Energy Information Administration (EIA), gasoline stocks declined 2.7 million barrels and became 197 million barrels in the US. Due to increased demand retail gasoline prices became 287 cents. However, EIA in its weekly report suggest that prices increased so much that it would not be surprising to see them to decline or stabilize over the next several weeks, since the high prices are so attractive that it stimulates production of gasoline. 

Gasoline

Source: EIA

This week oil prices drew a wavy trend. In the absence of political disputes (when compared to previous weeks) or the expectation of big economic problems for the near future, the prices, especially the Brent oil began to fall in the beginning of the week. The Energy Department announcement that refineries operated with 90.4 percent capacity last week (Bloomberg) was effective in this downward trend.  Even though the Brent has increased slightly on Friday due to worries about elections in Nigeria, the closing price closing price ($66.22) was $2.6 lower than previous week’s closure.

Oil Prices

Source: Financial Times

On the other hand, the superiority of Brent over WTI continues. It even became $61.7 this week. The reason is still  the same; ample supply of WTI in the Cushing prevents WTI crude oil price to increase. Moreover due to maintenance and some problems in the refineries of the region, the demand of WTI does not increase, but as the situation returns to normal probably, the price of WTI will increase with the rising demand.

For the stability of the oil prices, tranquility in the political environment and the positive economic expectations are important, since emergence of any conflict or any change in expectations cause speculative motives to gain ground and accordingly prices begin to fluctuate in the market. In this context, political situation in Nigeria and Middle East is so important. For the next week, according to Bloomberg’s survey 17 out of 38 analysts expect oil prices to fall, whereas 10 of them expect prices to increase.

22 April 2007

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