Outlook and Recommendation
Analysts expect the price of West Texas Intermediate (WTI) crude oil to average about $100 per barrel in 2012, almost $6 per barrel more than the average price last year. Based on recent futures and options data, the market believes there is about a one-in-fifteen chance that the average WTI price in June 2012 will exceed $125 per barrel, and about a one-in-fifty chance that it would exceed $140 per barrel. For 2013, Economists expect WTI prices to continue to rise, reaching $106 per barrel next year. The current forecast assumes that U.S. real gross domestic product (GDP) grows by 2.0 percent in 2012 and 2.4 percent in 2013, while world real GDP (weighted by oil consumption) grows by 2.9 percent and 3.7 percent in 2012 and 2013, respectively.
Revisions to the fourth-quarter GDP figures confirmed the original estimate, the US economy advanced at the fastest pace in six quarters. Over 90% of the advance was accounted for by inventory rebuilding and stronger motor vehicle sales. However, inventories remain historically high and turnover ratios suggest consumption will remain depressed.
There have been several developments associated with crude oil market over the last month but none have provided new direction to prices. A dispute over oil transportation and transfer fees between South Sudan and its northern neighbor, Sudan, have resulted in reports that South Sudan has shut in its production of about 350,000 barrels per day. Additionally, the European Union agreed last week to impose a ban of all oil imports from Iran into its member countries beginning in July of this year, which could lead to a reallocation of global crude oil flows. Lastly, negotiations for a voluntary write-down of Greek debt are continuing between the government and its bondholders, a reminder of continuing financial challenges impacting economies within the Euro zone, which still have the potential to affect near-term economic growth prospects and demand for petroleum products.
Geopolitical tensions between Iran and the West and the pressures of the oil embargo, will keep prices on the high side through March. The average price of Crude Oil should hold close to the 106.00 per barrel, but should begin to fall as tensions decline and as Libyan oil comes back on line faster than expected. OPEC continues to pump more oil to cover the shortages created by Iran. As the summer demand season approaches we should see oil begin to rise, and with predictions of better economic situation and improved production the demand for oil should increase.
Crude Oil Inventory (EIA)
U.S. crude oil refinery inputs averaged 14.6 million barrels per day during the week ending February 24, 282 thousand barrels per day below the previous week's average. Refineries operated at 83.6 percent of their operable capacity last week. Gasoline production decreased last week, averaging about 8.9 million barrels per day. Distillate fuel production decreased slightly last week, averaging just under 4.3 million barrels per day.
U.S. crude oil imports averaged nearly 9.2 million barrels per day last week, up by 96 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged about 8.9 million barrels per day, 539 thousand barrels per day above the same four-week period last year.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 4.2 million barrels from the previous week. At 344.9 million barrels, U.S. crude oil inventories are in the upper limit of the average range for this time of year.
Crude Oil Monthly Fundamental Forecast March 2012
March Major Economic Events
- This Week in PetroleumRelease Schedule: Wednesday @ 1:00 p.m. EST (schedule)
- Gasoline and Diesel Fuel UpdateRelease Schedule: Monday between 4:00 and 5:00 p.m. EST (schedule)
- Weekly Petroleum Status ReportRelease Schedule: The wpsrsummary.pdf, overview.pdf, and Tables 1-14 in CSV and XLS formats, are released to the Web site after 10:30 a.m. (Eastern Time) on Wednesday. All other PDF and HTML files are released to the Web site after 1:00 p.m. (Eastern Time) on Wednesday. Appendix D is produced during the winter heating season, which extends from October through March of each year. For some weeks which include holidays, releases are delayed by one day. (schedule)
- Heating Oil & Propane Update (October-March) Heating Oil, Propane Residential and Wholesale Price DataRelease Schedule: Wednesday at 1:00 p.m. EST
- Weekly Coal ProductionRelease Schedule: Thursday by 5:00 p.m. EST
- Weekly NYMEX Coal FuturesRelease Schedule: Monday by 5:00 p.m. EST
- Coal News & MarketsRelease Schedule: Monday by 5:00 p.m. EST
- Natural Gas Weekly UpdateRelease Schedule: Thursday between 2:00 and 2:30 p.m. (Eastern Time)
- Weekly Natural Gas Storage ReportRelease Schedule: Thursday at 10:30 (Eastern Time) (schedule)
Crude Oil Pivot Points (Time Frame: 1 Day)
Name S3 S2 S1 Pivot R1 R2 R3