Crude oil prices started the week with rises following the small changes they have had in recent days. The recent rally in US stock markets including S&P500 probably helped pulling up crude oil prices. The search of Gadhafi is still on and keeps the instability in the region. Recent reports suggest the US refineries have survived Hurricane Irene. Currently, crude oil prices are treaded slightly down. Today, the U.S. consumer confidence report to be published.
Here’s a short analysis of the crude oil market for today, August 30th:
Crude oil prices –August
On Monday, August 29th crude oil price (WTI) slightly rose by 2.23% to $87.27/b; Brent oil price also slightly inclined by 1.06% to $113.09/b; during August WTI spot oil declined by 8.79%; Brent oil fell by only 2.45%.
The chart below shows the normalized prices of WTI spot oil and Brent oil during August.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil remains around the $24-$26 mark; on Monday it rose to $25.82; during August, this premium rose by 27.51%.
According to Bloomberg, Hedge funds cut bullish bets on Brent oil by 12% in the week ending August 23rd. This may further shrink the gap between Brent and WTI spot oil prices.
Recent Crude oil News
US refineries survive hurricane: Following the recent Hurricane Irene that struck the East Coast of the US, the recent reports claim that the US refineries weren’t severally damaged. In any case, it’s projected that the power outages may reduce some of the regional demand for crude oil and natural gas.
On the other hand, the CME Group Inc. declared a force majeure for heating oil shipments into New York for August due to the recent Hurricane attack. Therefore, its not clear what will be the total effect of this Hurricane on the supply and demand for oil in the East Coast.
China’s energy consumption on the rise: according to recent review, China’s energy consumption rose in 2010 by 11% compared with 2009’s energy consumption. If this trend will further continue in 2011, this could further pressure crude oil prices to remain high.
Libya’s war not over yet: according to CNN, Gadhafi family members are in Algeria, but it’s not clear where Gadhafi is located; there are concerns that he may continue to pose a threat on the Libyan people.
US Consumer Confidence report:
Last month, the consumer confidence index slightly inclined during July compared with June’s index. The current expectations are that this index may further fall in the August report; this news could affect commodities traders including in the crude oil market.
S&P500 / crude oil prices – August update
The S&P500 index inclined again on Monday by 2.83%, and completed a 7.68% rally since the beginning of last week. During August the correlation between oil prices and S&P500 was 0.691 for Brent oil and 0.525 for WTI spot oil. This means, as the Stock market further rises, crude oil prices are likely to follow and incline 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 slightly down in the European market:
The Nymex crude oil price, short term futures (September 2011 delivery) is traded at $87.00 / barrel, a $0.27/b decrease or 0.31%, as of 10:00*.
The Dated Brent spot oil price declines by $0.59/b to $112.50/ barrel as of 10:11*.
Thus, the current premium of Brent over WTI is at $25.50/b.
Crude oil price outlook and analysis:
The ongoing rally in the stock market might continue to pull up crude oil prices. It’s not clear what will be the actual and full extent of the ramifications from the recent Hurricane, but currently it seems that it did little damage to oil and gas infrastructure and may have curbed some of the oil and gas demand due to power outages. 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):
15.00 – US consumer confidence
17:30 – FOMC meeting minutes
10.00 – Euro Area rate of unemployment
10.00 – Euro Area annual inflation (July)
13.30 – ADP estimate of U.S. change in non-farm employment
13:30 – Canada GDP by industry
15:30 – EIA report about Crude oil inventories
2.00– China Manufacturing PMI
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.