WTI oil futures open today’s trading session near $97 a barrel as a worsening crisis in Japan has investors wondering if the recent drop in oil prices has bottomed out, with predictions that gas and oil supplies to the country will need to increase.
Latest WTI Oil Price
US Light crude oil futures for April 2011 delivery was trading at $97.23 a barrel, 06.15 GMT this morning on the NYMEX.
Global investors have sold oil futures after a massive earthquake and tidal wave demolished Japan’s northeast coast and killed an estimated 10,000 people.
Earlier this morning, Japan suspended operations to keep a stricken nuclear plant from melting down after surging radiation made it too dangerous to stay.
The fast moving series of events has put Japan’s people on edge and has the government scrambling to contain a crisis caused by last week’s earthquake and tsunami.
“The Middle Eastern premium seems to be eroding as we concentrate on an uptick in supply as a result of Japan shutting down oil refining capacity.” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney.
Have Oil Prices Bottomed Out?
“The market should be more focused on the Middle East. I don’t see too much more downside to the oil price from here. The price falls we’ve seen in the last couple of days aren’t justified given that events in the Middle East continue to simmer along and threaten global oil supply.” said Ben Westmore, commodities economist with National Australia Bank.
Gas Prices on the Rise?
Meanwhile, Peter Voser, Shell’s chief executive said that European gas prices will be driven higher by the crisis in Japan as supplies of liquefied natural gas (LNG) are rerouted to the embattled country.
The warning came as Deutsche Bank released a report in which it said Britain was the most vulnerable gas market in Europe to LNG diversions to Japan.
Japanese Oil Update
Oil exports to Japan from the Gulf region have been temporarily halted, though order volumes are unchanged, Gulf officials told Reuters on Tuesday.
“Things are so uncertain now, and with the ports shut down, we have rescheduled all crude shipments going to Japan, but so far there have been no changes to the order volumes.” said an official from state owned Kuwait Petroleum Co.
The recent Japanese earthquake shut around 1.3 million barrels of Japan’s 4.52 million barrels a day refining capacity.
Japan was responsible for over five percent of global oil demand in 2009, according to BP.