Crude oil prices ended last week with moderate rises after the turbulent they have endured during the previous week. It’s currently not clear yet what were the damages to the East Coast infrastructure due to Hurricane Irene including the oil and natural gas pipelines. This news may effect the oil and gas production. Today, the US pending home sales report will be published.
Here’s a short analysis of the crude oil market for today, August 29th:
Crude oil prices –August
On Friday, August 26th crude oil price (WTI) slightly rose by 0.20% to $85.37/b; Brent oil price also slightly inclined by 0.70% to $111.90/b; during August WTI spot oil declined by 10.78%; Brent oil fell by only 3.48%.
The chart below shows the normalized prices of WTI spot oil and Brent oil during August. It shows the rally of Brent and WTI oil prices in past weeks, but they still didn’t gain back the falls they have endured at the beginning of the month.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil continues to rise in the past few days; on Friday it rose to $26.53; during August, this premium rose by 31.01%.
US pending Home sales:
This news could serve as a good indicator of the progress of the US housing market and the economic development of the US. The recent new home sales report from last week showed a moderate drop in sales during July, so the expectations on this report aren’t that high. Any further news of a slowdown in US economy might push down the expectations of traders regarding the demand for oil and resulting in a drop in crude oil prices.
S&P500 / crude oil prices – August update
The S&P500 index inclined on Friday by 1.93%. During August the correlation between oil prices and S&P500 was 0.683 for Brent oil and 0.502 for WTI spot oil. This means, as the Stock market inclines, crude oil prices are likely to follow and rise as well. If the S&P500 index will continue to rise today, it might further pull up crude oil prices.
Current crude oil prices
Major crude oil prices are currently traded up in the U.S. market:
The Nymex crude oil price, short term futures (September 2011 delivery) is traded at $86.98 / barrel, a $1.61/b increase or 1.89%, as of 16:00*.
The Dated Brent spot oil price inclines by $1.14/b to $113.04/ barrel as of 16:11*.
Thus, the current premium of Brent over WTI is at $26.06/b.
Crude oil price outlook and analysis:
The recent rally in the stock market might continue to pull up crude oil prices. In the near future, I still think that WTI oil price will remain around $85-$90 mark and Brent oil around $108-$112.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13:30 – ECB conference Trichet speaks
15:00 – U.S. pending home sales
15.00 – US consumer confidence
17:30 – FOMC meeting minutes
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG