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Will Crude Oil Maintain Decline? Most Likely

April 23, 2013 at 20:37 by Vladimir Vyun

Crude oil has dropped sharply with other commodities last week. Will the downtrend continue or there is still hope for those who want to be bullish on the energy market?

So far, fundamentals do not look very good for oil. Monday showed bad news from China and United States, while Tuesday added to the negativity by bad PMIs from the eurozone. Not only the negative data hurts prospects for demand, but it also boosts the US dollar, further weakening prices for crude. On top of that, Wednesday’s report is expected to show that US inventories of crude grew 1.8 million barrels last week.

Trading NRG said in its outlook for this trading week:

The bottom line, I guess the prices of oil will continue to fall next week.

So far, such forecast proved true. Longer-term forecast do not look good either.

The Organization of Petroleum Exporting Countries released its outlook for oil supply and demand. Global consumption is expected to fall to 88.62 million barrels per day in the second quarter from the first quarter’s 89.02 mb/d, but to pick up in the next three months to 90.12 mb/d. World oil supply remained steady in March. The balance of demand and supply (consumption minus production) is expected to decrease from 29.28 mb/d in Q1 to 28.99 mb/d in Q2 (meaning that growth of supply will outpace expansion of supply), but should rebound to 30.26 md/d in Q3.

The US Energy Information Administration also released its April estimates. The agency predicted that the average price for Brent grade of crude oil will decrease from $119 per barrel in 2012 to $108 per barrel in 2013. The gap between WTI and Brent grades of crude should narrow from $20 per barrel last year to $14 per barrel this year.

If you have any questions and comments on oil today, use the form below to reply.

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