Crude oil: on the swings

The calendar year started with bullish sentiments for crude. All components of the OPEC basket registered price increases, particularly those related to Brent. The African blends remained the chart toppers in terms of largest price increase to hit the $95-100 price range, supported by tight supply due to disruptions in the North Sea and a strong demand from European and Asian countries. In late February, the political turmoil in Middle Eastern countries drove crude prices further up. Although the oil supplies were high, the upheaval in Libya and oil production curtailment fueled prices to top at $103 towards the end of February 2011. With strong futures market attributed mainly to the fears of a supply shortage due to the unrest in North Africa, OPEC basket checked-in at $100 per barrel for the first time in almost two years after the 2008 meltdown. Gasoline prices followed the trail and reached $3.57 in March 2011 on the fears of the Libyan blitz and instability in other regions. Weakening dollar had been another factor in keeping the oil prices up. Later in April supply concerns were dampened to some extent as the Japanese catastrophe jolted the globe. While the oil consumption in Japan declined massively after the earthquake, the reconstruction eyed some restoration in demand. As the triple catastrophe and the turmoil in the MENA region set the background for the 2011 oil market, crude oil witnessed a plunge in May 2011, with Brent futures dropping over $10 per barrel. This was seen as a major correction to the ongoing price ramble where WTI crude and Brent both shed about $17 per barrel. Crude futures tumbled in May 2011 with WTI retreating below $100 a barrel for the first time since March. In mid June WTI further fell to $93, its lowest since February. The investors had finally realised the intensity of eurozone crisis as the euro and other currencies went down and dollar inched up. June saw excessive volatility in the oil market. Oil prices recently have in tandem with the speculation and financial factors. The release of Strategic Petroleum Reserve (SRP) pushed Brent and WTI crude prices down before a recoil. After sinking oil prices and Brent crude falling 2 percent towards the end of June, some respite was seen by the oil producers as WTI rose to $94.96 Poor economic outlook worldwide affected the energy demand and hence the oil and gas prices. August saw the largest dip of 6 percent in oil prices in 6 months. The price dropped to $86.88 per barrel on NYMEX. A falling trend in prices was seen throughout August as crude oil futures plunged with WTI weakening more than Brent, widening the spread by $26 a barrel. September was less volatile while October and November saw a fast paced recovery in prices with an increase of about 22 percent. The spread between WTI and Brent crude narrowed towards the end of November and beginning of December 2011. During CY11 Brent has fluctuated between $100-120 a barrel and drifted lower on easing supply disruptions in the North Sea and restoration of Libyan production. The year has been choppy for oil prices. A rising trend in the beginning followed by a weakening of prices towards the later half of CY11 and then a sudden rise again makes trajectory for CY12 unpredictable.