Global Macro Perspectives
Main development since latest weekly is realization that light sweet Libyan crude can’t really be substituted by Saudi Arabia and market is in short supply.
Additional to Libyan war, we have unrest in Yemen, strikes in Gabon and postponed elections in Nigeria. Combined these three countries produce 2.8 million bbl of light sweet crude per day.
Absent of a stock market crash, crude oil is bound only up.
I was wrong on the assumption that West will let Gaddafi win the war in Libya. U.N. approved military intervention will keep the Libyan oil out of the markets for longer then previously thought. This is positive for crude oil price.
Concerning Japan it is reasonable to assume increased derivatives demand, also positive for oil price.
In the U.S. the gasoline draw is looking quite impressive (although it is not demand driven, rather a product of refiner discipline). This could help clear Cushing stockpile glut and close the WTI – Brent pricing gap.
Talking about strange twist of events… Markets not buying the story.
The United Nations Security Council approved a resolution authorizing international military intervention (any measures short of a ground invasion) in Libya.
Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., talks about the impact of political protests in Middle East and North African nations, including Libya, on the global economy.
Libya in unrest/civil war is having a mayor impact on the oil markets. Crude oil (brent) has yesterday reached post crisis high of 108.7 USD/bbl. The outcome of the Libya crisis is absolutely uncertain and together with other regional instability will be a strong factor for rising oil prices.
High oil price does not bode well with economic growth, so this could be large negative factor for economic growth and inflation.
According to OPEC January data Libya produces approximately 1.6 million barrels of crude per day. This is 3.9% of total OPEC production and 1.8% of world total demand.