Crude prices remained at 30-month highs last week as supply worries persisted amid turmoil in Libya and the Middle East. Concerns over softer demand, triggered by interest rate hikes in China and Europe and a major aftershock in Japan, capped a further rally. ICE Brent gained $7.95 from the previous week to settle at $126.65 a barrel. West Texas Intermediate (WTI) rose $4.85 to $112.79.
Crude prices remained at 30-month highs last week as supply worries persisted amid turmoil in Libya and the Middle East. Concerns over softer demand, triggered by interest rate hikes in China and Europe and a major aftershock in Japan, capped a further rally. ICE Brent gained $7.95 from the previous week to settle at $126.65 a barrel. West Texas Intermediate (WTI) rose $4.85 to $112.79.
The battle to control the Libyan oil town of Brega dragged on for another week, prolonging the loss of 1.3 million barrels a day of crude exports. However, the first shipment reportedly set sail on Wednesday from a rebel-held Libyan port for Asia.
Unrest in other oil-producing countries helped keep crude prices strong. Saudi Arabia tried to broker a deal for Yemen’s president to step down, while delayed elections in Nigeria sparked anger across the oil-rich nation.
Better economic data in the US further supported crude prices. New jobless benefit claims fell again last week by 10,000 to below 400,000, while retailers posted stronger-than-expected sales in March, strengthening the outlook for the world’s largest oil consumer.
The US dollar weakened to a 15-month low against the euro as the European Central Bank raised its interest rate for the first time since 2008 from 1% to 1.25%. On the same day, Portugal asked for a bailout worth 75 billion as it struggled to raise 9 billion euros.
Two days earlier, China also raised its deposit and lending rates by 25 basis points to 3.25% and 6.31% respectively, the fourth hikes since October, to tame inflation. Tightening in Europe and China raised concerns over a slowdown in the global economy and demand for oil.
The International Energy Agency (IEA) warned that current oil prices are harming global growth. Opec insisted demand and supply were still balanced and members could do nothing to curb prices at $120, putting the blame instead on speculation.
The outlook for crude continues to be bullish in the near term due to geopolitical problems. Supportive US economic data and the approaching corporate earnings season should keep prices this week above $105 for WTI and $115 for Brent. Thaioil expects prices may step up to the next psychological level of $130 if Mideast supply concerns persist.
The market this week will focus on US data including retail sales, inflation, industrial production and consumer sentiment. As well, the IEA, the US Energy Information Agency and Opec on Tuesday will produce monthly updates.
Gasoline prices in Singapore last week rose more than $5 a barrel to a 33-month high above $130, while diesel surged more than $6 to close above $140. The market received support from additional spot demand from Indonesia for gasoline and diesel after the country’s biggest refinery was shut for maintenance following a storage tank fire the week before. Demand was also firm from Vietnam and Sri Lanka. In Japan, nearly 13% of refining capacity is shut down in the wake of the March 11 earthquake, requiring cargoes from South Korea and tightening regional supply.
The outlook remains favourable given strong crude prices and coming summer demand for gasoline and diesel. However, product prices are expected to lag crude gains as high prices start to negatively affect demand, especially in developed countries.
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