As can be interpreted from the two monthly oil reports recently published by OPEC and the International Energy Agency (IEA), the oil futures trades in the oil markets for the month of May witnessed a narrow price range with a positive morale overshadowing the future contracts especially in the American market. This positive sentiment resulted in the continuation of relatively high and OPEC-favored crude average prices and led to slight crude prices increase, especially in the US oil market in New York.
The average oil price of OPEC basket in the month of May was $100.65 per barrel, 50 cents less a barrel as compared to last month average price. Whereas the average price of North Sea oil (Brent) in the month of May was $103.28 per barrel, 15 cents less a barrel as compared to last month. This negligible change in the average monthly oil price of both OPEC basket and Brent crude indicates the relative stability of oil prices in the global markets and the success of OPEC flexible strategy that created a positive balance between supply and demand which then ensured the availability of 3-4 million barrel of excess production capacity that diminished the impact of speculators’ manipulation and rumors on oil prices. Supporting this is the slight recovery in oil prices of West Texas which witnessed a 3 percent increase in its monthly average prices during the month of May as compared to the previous month as a reaction to the gradual improvement of the US economy, and the late announcement of the US and OECD oil inventories that reached 2680 million barrels, an increase of 16.7 million barrels compared to last month.
Several published global economic optimistic reports will definitely help the continuation of these positive conditions in global oil markets. As reported in OPEC monthly report, the expectations of the 2013 global economic growth remains unchanged as compared to previous reports at 3.2 percent, with a positive increase in the Japanese economy (1.5 percent instead of the previous forecast of 1.1 percent), and slight decline in the Chinese economy (7.9 percent instead of the previous forecast of 8.0 percent).
Despite the no change in the global economy growth in the first half of this year, some experts are still showing optimistic views and expect a limited positive recovery in the second half supporting the sentiment in the oil market. The two reports forecasted an increase in the 2013 global oil consumption of 0.8 million barrels per day (OPEC), and 0.785 million barrels per day (IEA) mainly by China and local consumption in the GCC countries regardless of the expected slight consumption decrease in the euro zone as a result of the continuation of the week euro Zone economy. As I previously reported in several articles, this slight rise, which does not exceed 1 percent, does not represent any supply challenge on OPEC or producing countries outside OPEC and hence, will not affect the price at all.
Although the average price of oil since the beginning of the year fell by 8 percent compared to the same period last year, I believe that the oil industry looks to this slight acceptable decline positively which will help to protect the existing balance between supply and demand and help sustain oil prices close to OPEC target of $100 a barrel.
In fact, many economic indicators and other factors affecting the oil industry support the continuation of the current positive market conditions in the second half of this year and the continuation of the oil prices near the price preferred by OPEC countries ($100 per barrel) with slightly plus or minus acceptable fluctuation. The only factor that is difficult to predict is the geopolitical factor, both in the near-term – such as the Syria conflict with the possibility of the fly-zone embargo enforcement and/or military intervention, and in the mid-to-long-term – such as the possible radical military solution to the Iranian nuclear issue.
