Crude oil prices finished August with moderate falls, despite the rise in the major stock markets including the S&P500. Currently, crude oil prices are treaded down. Today, the US unemployment claims report will be, the natural gas EIA report and US’s ISM Manufacturing PMI.
Here’s a short analysis of the crude oil market for today, September 1st:
Crude oil prices –August
On Wednesday, August 31st crude oil price (WTI) finished the month with a 0.10% decline to $88.81/b; Brent oil price also declined by 0.32% to $115.22/b; during August WTI spot oil declined by 7.18%; Brent oil fell by only 0.61%. The chart below shows the prices of WTI spot oil and Brent oil during May to August.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil is still high and remains around the $25-$26 mark; on Wednesday it inclined to $26.41; during August, this premium rose by 30.42%.
ADP US labor report – employment rose by 91 thousand
In the recent ADP report, US employment rose by 91,000 in August. If this trend will continue, it will at least keep the unemployment rate from rising, curb some of the speculations around the FOMC meeting in September and whether there will be an additional stimulus plan ,and indicate that the US economy isn’t slowing down as fast and hard as some suspected.
On Today’s Agenda
U.S. ISM Manufacturing PMI: This report shows the monthly change in US manufacturing sector. During last month, the index fell to 50.9%; this index might affect traders of commodities including crude oil and natural gas (see here my review of last report);
Weekly U.S. unemployment claims: For the week ending on August 20th, initial claims increased by 5,000 to 417,000 claims; this report could further indicate the economic progress of the US in the labor market;
Natural gas Report – EIA: Today, the EIA will publish its weekly report on natural gas market in the US. In the previous report, the underground natural gas storage (Billion Cubic Feet) inclined last week by 73 Bcf to 2,906 billion cubic feet for all lower 48 states.
US Petroleum Stockpiles didn’t change last week
The US Energy Information Administration published yesterday its weekly report on the U.S. petroleum market: according to the report, U.S. Petroleum and oil stocks nearly didn’t change again and fell last week by 380 thousand barrels. For the week ending on August 26th crude oil stocks reached 1,794.1 million barrels.
The chart below shows the petroleum and oil stockpiles levels compared to the WTI crude oil prices in 2010-2011.
S&P500 / crude oil prices – August update
The S&P500 index inclined again for the fourth straight day, yesterday (Wednesday, August 31st) by 0.49%, and completed an 8.46% rally since the beginning of last week. During August the correlation between oil prices and S&P500 was 0.686 for Brent oil and 0.523 for WTI spot oil. If the Stock markets will continue with their rally, crude oil prices are likely to follow and rise as well.
Current crude oil prices
Major crude oil prices are currently traded slightly down in the European market:
The Nymex crude oil price, short term futures (October 2011 delivery) is traded at $88.67 / barrel, a $0.14/b decrease or 0.16%, as of 12:28*.
The Dated Brent spot oil price declines by $0.33/b to $114.88/ barrel as of 12:39*.
Thus, the current premium of Brent over WTI is at $26.21/b.
Crude oil price outlook and analysis:
The US stock market indexes continue to rally as traders are regaining their trust in the stock market; this rally is also likely to pressure crude oil prices to rise. In the near future, I still think WTI oil price will remain around $85-$90 mark and Brent oil around $108-$112, but in September crude oil prices are likely to continue rising.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13:30 – Department of Labor report – U.S. unemployment claims
15.00 – U.S. ISM Manufacturing PMI
15:30 – EIA report about Natural gas storage
13.30 – U.S. unemployment rate report & non-farm employment change
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.