Brent oil price ends week over $99, OPEC defends supply

29 January 2011 29 January 2011

BonTrade

Brent crude oil prices end another see saw trading week back over $99 a barrel as stock markets sold off recent gains and a continuing oil supply debate has OPEC’s Secretary General back on the defensive regarding world oil supply and demand.

Brent Oil Futures – Closing Price

Brent crude oil futures for March 2011 delivery ended the week’s trading session at $99.31 a barrel on the ICE Futures Exchange, which is $1.68 higher than Brent’s close last week at $97.63.

OPEC Defending Global Oil Supplies

OPEC’s Secretary General Abdullah Al-Badri reiterated that oil prices nearing $100 were not caused by a shortage of oil, but OPEC member countries will not step up oil output levels for now, saying that he was 100 percent sure there was no shortage in the oil market.

Badri said the near record spread between WTI oil futures and Europe’s Brent showed that oil futures had become disconnected from the physical market, blaming cold weather and trader buying for price gains.

OPEC’s offical line remains the same, that there’s more than enough supply in the market, and that higher oil prices alone are not going to force them into action.

“I’m sure 100 percent when looking at the markets there is no shortage in the market, there is plenty of oil in the market. If you have a floating and commercial stocks for 60 days and we at OPEC are producing 29.3 million barrels per day, how are you telling me there is a shortage? When OPEC sees an imbalance in the market, OPEC will act to balance the market.” Badri said.

Unrest in Egypt Affecting Prices

Oil prices traded higher again on Friday came as traders bought back into crude after unprecedented unrest in Egypt.

Although the Arab country is a small oil producer, traders were worried because it is an important gateway for Middle East oil through the Suez Canal and the 200 mile long Sumed pipeline, which connects the Red Sea and the Mediterranean.

Investors and oil traders are also concerned that political protests could spread to other Middle East countries that are more important to global oil markets such as Saudi Arabia. The spike in oil prices towards $100 has raised concerns about its impact in global economic growth and inflation.

“It looks like there is a lot of worry in the market about a possible closure of the Suez Canal because of the escalating tensions in Egypt. That makes perfect sense about the rally we’re seeing in the crude market.” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.

Meanwhile, the IEA has asked OPEC to boost oil output, stating that high oil prices are a “detriment to the world economic recovery”, commented Nobuo Tanaka, the IEA’s executive director, in an interview on Friday in Davos, Switzerland.