Oil Prices – Daily Outlook August 22

The Libyan war is nearing an end after over half a year of fights between the rebels and Qaddafi’s forces. This news is already affecting the trade of oil as Brent is currently traded down; the spread between Brent and WTI also closes a bit after it had reached its peak on Friday. Today, the US Mortgage delinquency rate will be published.

On Friday, August 19th oil price (WTI) slightly fell by 0.15% to $82.26/b; Brent on the other hand inclined by 2.43% to $109.53/b; during August WTI declined by 14.03%; Brent fell by only 5.52%.

The premium of Brent over WTI sharply inclined again on Friday August 19th to $27.27/b – the widest gap between these two oil prices; during August this premium rose by 34.67%, mainly because WTI declined by a sharper rate than Brent did. The recent news from Libya might ease the rise of Brent and bring down the premium of Brent over WTI.  

The rebels have conquered most of Tripoli

 The Rebels have conquered most of Tripoli and the news suggests that they are negotiating with Qaddafi over the terms of his exist. In the mean time, there are fights near Gaddafi’s palace.

 Since February 2011, the Libyan oil production has fallen from 1.6 million bbl/d in 2010 to 53 thousand bbl/d during July 2011.

Oil price outlook:

The news from Libya might contribute to the recent downward trend of oil prices; it might even help bring down the high premium of Brent over WTI. But it’s still far from declaring status quo in Libya: until the rebels will start to organise and secure the stability of Libya, it will take time until Libya’s oil production and export will resume its pre-war capacity. Therefore this news might stir up the oil market and bring down oil prices, especially Brent.  

For further reading: Weekly outlook for August 22-26

Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.