Crude oil price in 2011 When analyzing the prospects of crude oil price in 2011, there are several aspects worth considering. The expected increase in world demand for Oil in 2011 - IEA (International Energy Agency) expects petroleum demand worldwide in 2011 to be 88.8 million barrels per day, which is roughly a 1.6% increase in demand for oil in 2011 compares to 2010; in 2010 the daily consumption was estimated at 87.4 MB/d. OPEC, which is responsible for about 40 percent of the world crude oil supply, announced, in a recent OPEC meeting, it will sustain its current quota of 24.845 million which was set back in 2008.

1. Crude Oil – An Integrated Analysis
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CONTENTS
Crude oil Prices in 2011
China’s demand in 2011
U.S Dollar
Europe’s recovery
Global crude oil & Liquid fuel consumption
Non-OPEC supply
Crude oil and Liquid fuels overview
Technical View
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Crude oil price in 2011
When analyzing the prospects of crude oil price in 2011, there are several aspects
worth considering. The expected increase in world demand for Oil in 2011 - IEA
(International Energy Agency) expects petroleum demand worldwide in 2011 to be 88.8
million barrels per day, which is roughly a 1.6% increase in demand for oil in 2011
compares to 2010; in 2010 the daily consumption was estimated at 87.4 MB/d. OPEC,
which is responsible for about 40 percent of the world crude oil supply, announced, in a
recent OPEC meeting, it will sustain its current quota of 24.845 million which was set
back in 2008.
China’s demand in 2011
On the one hand, Asia’s demand for energy is responsible for 70% of the world energy
growth in the past couple of decades, in which China was responsible for 40% of it.
Also, China’s energy demand nearly tripled since 1990. On the other hand, as
presented above, it’s expected that China’s growth in demand for crude oil will decrease
compare to 2010. This slowdown could be because of China’s fight to cool down its
economy as there inflation pressures increase (as of Nov 2010, the Y-2-Y inflation rate
was 5.1%). Therefore, China’s role in driving crude oil price higher will remain to be
seen.
U.S. dollar
The U.S. has taken several steps in the past couple of years that reduced the value of
the dollar against major commodity markets and drove them high (such as gold prices).
I refer to the very low interest rate which has remained at 0.25% in 2009-2010, and the
quantitative easing phase 1 and 2, in which the Federal Reserve gave loans to U.S.
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banks in an attempt to stimulate the U.S. economy. As the U.S. dollar continue to loose
its appeal and worth, investors will keep on relying on the commodity market and
consequentially will drive commodities prices up, including crude oil price.
Europe’s recovery
The Euro zone is also a key player in consuming crude oil, and as the year will
progress, Europe’s recovery from the recent slowdown could affect crude oil demand
and price. Below are the other factors that also constitute to the study.
Global Crude Oil and Liquid Fuels Consumption
World crude oil and liquid fuels consumption grew by an estimated 2.4 million bbl/d in
2010 to 86.7 million bbl/d, the second largest annual increase in at least 30 years. This
growth more than offset the reductions in demand during the prior two years and
surpassed the 2007 consumption level of 86.3 million bbl/d. EIA expects that world
liquid fuels consumption will grow by 1.5 million bbl/d in 2011 and by an additional 1.7
million bbl/d in 2012. Non‐OECD countries will make up almost all of the growth in
consumption over the next 2 years, with the largest demand increases coming from
China, Brazil, and the Middle East. EIA expects that, among the OECD regions, only
North America will show growth in oil consumption over the next two years, offsetting
declines in OECD Europe and Asia.
Non‐OPEC Supply
EIA projects that non‐OPEC crude oil and liquid fuels production will increase by
170,000 bbl/d in 2011 and then decline slightly in 2012. Increases in non‐ OPEC oil
production during 2011 will be concentrated in a few countries, particularly China and
Brazil, where EIA expects annual average production growth of 140,000 and 170k bbl/d,
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respectively. In 2012, EIA expects Canadian production growth to average 170k bbl/d
while China and Brazil grow by 140k and 110k bbl/d, respectively. Other non‐OPEC
production is expected to decline. EIA expects that Mexico’s production will fall by
about 220k bbl/d in 2011, followed by a further decline of 80k bbl/d in 2012. Similarly,
production from the North Sea will fall by 210k bbl/d and 170k bbl/d in 2011 and 2012,
respectively.
The former Soviet Union republics to increase production by 320k bbl/d in 2011,
followed by a production decrease of 180k bbl/d in 2012 mainly driven by decreases in
Russia, whose West Siberian fields are expected to decline significantly. Projected U.S.
crude oil and liquid fuels production declines by 100k bbl/d in 2011 and by a further
160k bbl/d in 2012.
Crude Oil and Liquid Fuels Overview
We also expects continued tightening of world oil markets over the next two years,
particularly in light of the recent events in North Africa and the Middle East, the world’s
largest oil producing region. The current situation in Libya increases oil market
uncertainty because, according to various reports, much of the country’s 1.8‐million
bbl/d total liquids production has been shut in and it is unclear how long this situation
will continue. The market remains concerned that the unrest in the region could
continue to spread. The forecast for total world oil consumption grows by an annual
average of 1.6 million bbl/d to 2012. Supply from non‐Organization of the Petroleum
Exporting Countries (non‐OPEC) countries grows about 0.2 million bbl/d this year and
then will fall slightly in 2012. Consequently, the market will rely on both inventories and
significant increases in the production of crude oil and non‐crude liquids in OPEC
member countries to meet projected world demand growth.
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Onshore commercial oil inventories in the Organization for Economic Cooperation and
Development (OECD) countries remained high in 2010, but floating oil storage fell
sharply. EIA expects that OECD oil inventories will decline to the lower bound of the
previous 5‐year range by the end of 2012.
There are many reasons for market uncertainty that could push oil prices higher or
lower than current expectations. Among the uncertainties are: the continued unrest in
producing countries and its potential impact on supply; decisions by key OPEC member
countries regarding their production response to the global recovery in oil demand and
recent supply losses; the rate of economic recovery, both domestically and globally;
fiscal issues facing national and sub‐national governments; and China’s efforts to
address concerns regarding its growth and inflation rates.
Rising crude oil prices are the primary reason for higher retail prices, but higher refining
margins are also expected to be a contributing factor. It is estimated that natural gas
working inventories ended February 2011 at 1.7 trillion cubic feet (Tcf), slightly below
the 2010 end‐of‐February level. Inventories are expected to remain relatively high
through 2011. The projected Henry Hub natural gas spot price averages $4.10 per
million Btu (MMBtu) in 2011, $0.29 per MMBtu lower than the 2010 average. Also, the
natural gas market will begin to tighten in 2012, with the Henry Hub spot price
increasing to an average of $4.58 per MMBtu.
In next section, we have illustrated our technical view on Crude oil by presenting its
various averages, Fibonacci retracement levels, Expansion levels and its in depth
analysis using various technical indicators on different time frames of charts supporting
our technical view, and on the basis of these our technical target on Crude oil.
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TECHNICAL VIEW
Crude Oil CMP - $113.05 Target Price - $121
Moving averages
Moving Averages 20 Day 50 Day 100 Day 200 Day
Daily $105.11 $99.24 $93.99 $86.41
Weekly $94.42 $84.52 $78.68 $82.02
Fibonacci retracement levels
Levels 0.0% 23.6% 38.2% 50% 61.8% 100%
Price $33.49 $60.09 $76.68 $90.30 $103.91 $147.9
Expansion levels
SCRIPT 38.2% 50% 61.8% 76.4% 100% 138.2% 150% 161.8%
Crude $87.22 $93.44 $99.66 $107.40 $120.04 $140.20 $146.4 $152.67
Weekly Pivot
SCRIPT R4 R3 R2 R1 P S1 S2 S3 S4
Crude $124.65 $118.65 $112.65 $110.57 $106.65 $104.57 $100.65 $94.65 $88.65
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We will study the expected movements for crude oil from a simple classical point of
view, The weekly chart shows the aggressive descend that occurred after recording the
historical high around $147.85 towards the bottom of 35.12 zones, from where crude
147.85
started its bullish correction. Inside this correctional wave, oil succeeded in passing over
23.6% Fibonacci retracement and built a solid technical base on this level. This base
assisted to breach 38.2% Fibonacci level at $ 78.00 per barrel, where it h
hovered for
about one year. Crude consolidated near its 50% retracement and took solid support of
trendline drawn from troughs of Feb 2009. Now it has breached its consolidation taking
support of 50% retracement and is resisting at its 61% retracement, which if broken
whic
given the ongoing geopolitical tensions; then can test its upward resistance line at $1
$120.
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Below is the weekly chart of crude oil with momentum oscillator Days RSI. We can see
RSI is at 73.37, a bit above its overbought zone of 70, though if we examine the trend of
RSI; it is headed upward in a channel and next resistance for RSI is at 75.14 which will
compliment Crude oil prices in near short term period.
Below, Crude is used with trend indicator, bollinger Bands, with 20 Day moving
movi
average; we can see that recently the upper band is breached by crude prices showing
its high volatility in given scenario & it is giving space for prices to fill in; which is a
bullish signal in short term.
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Below is the monthly chart of Crude oil. We have drawn a trendline from troughs of
august 2005 and if we examine the trendline, the importance is that price of Crude oil is
bullish above the trendline and bearish below it. Recently Crude oil prices has breached
this long standing trendline and took a solid support on it in this current month Candle
and is now overall bullish. The prices of crude oil will be in uptrend and at targets like
$115 - $118 we may see a pullback or correction thought the prices will contiinue its
uptrend in coming short term period till June. Next, we have seen an expansion of
Crude oil prices from $35 to $87 where it formed a sollid support at $67 and headed for
its next uptrend to $90. The expansion level of 61.8 is breached at $100 where it has
left a long upper shadow; though given the on going Mid east crisis and inflation worries
Mid-east
complimented crude oil prices to breach this level and made a fresh 2 ½ year high of
$113.16. The next target from here for crude pirices is $121 at the expansion level of
100%. From there, the next expansion level of 138.2 comes at $139 and 150 at $145.
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In the monthly chart of crude oil below, its Fibonacci retracement of downtrend from all
rude
time high of $147.85 to $35.11. If we see the retracement of 61.8% which is breached
.8%
recently where prices also took solid support formation on it. The next retracement of
76.4% is at our target of $120 as well complimented by our trendline above which crude
oil prices tend to be bullish.
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