Oil prices had many twists and turns during 2011 but in the end, oil prices finished the year moderately above their initial price level from the beginning of the year: WTI inclined by 7.9% and Brent rose by 12.27%. Let’s shortly examine the oil market in 2011 and try to provide and outlook for crude oil prices in 2012.
During 2011 WTI rose by 7.9%, while Brent outperformed WTI and inclined by 12.27%. The chart below shows the development of crude oil prices during 2011. There were sharp gains for oil prices during the first four months of 2011.
Some attribute this rise to the sudden up rise in the Middle East mainly in Libya – one of the leading OPEC crude oil producers in Africa with nearly 1.6 million barrels per day during 2010; the civil war in Libya caused a shut down of its production. During the next several months, oil shifted with rises and falls but had a downward trend, as WTI reached a year low of $75.4 per barrel on October 4th. There are five suggested reasons for this decline:
- The speculation around the economic slowdown in U.S., Europe and China (the leading regions in consuming crude oil);
- The stepping up of several OPEC countries, mainly Saudi Arabia, in raising their oil production to compensate for the decline in Libya’s oil production;
- The release of 60 million barrels of oil from the emergency storage of the IEA, This move helped bring down, for a short time the prices of crude oil;
- The decline in the U.S. stock markets that tend to be strongly correlated with the development of oil;
- The deprecation of the major currencies including Euro, AUD and CAD.
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