Crude oil prices continue their rally and keep on erasing loses they have had during the first week of August. The rising indexes in US stock markets including S&P500 indexes are probably helped pulling up crude oil prices. Currently, crude oil prices are treaded down. Today, there are many reports to be published including: The US crude oil report, the Euro Area rate of unemployment, annual inflation, Canadian GDP, ADP estimate of US change in non-farm employment and China’s Manufacturing PMI.
Here’s a short analysis of the crude oil market for today, August 31st:
Crude oil prices –August
On Tuesday, August 30th crude oil price (WTI) rose by 1.87% to $88.90/b; Brent oil price also inclined by 1.50% to $114.79/b; during August WTI spot oil declined by 7.09%; Brent oil fell by only 0.98%.
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 remains around the $24-$26 mark; on Tuesday it slightly rose to $25.89; during August, this premium rose by 27.85%.
Consumer Confidence Index in August fell
Yesterday, the US consumer confidence report was published as the consumer confidence index declined in August. This news, however didn’t affect much traders as the financial markets including the stock markets and also crude oil prices finished yesterday with rises. This might suggest that the “panic” in the financial markets during the first couple of weeks in August was a bit an overreaction and has passed.
US Petroleum Stockpiles report
The US Energy Information Administration will publish today its weekly report on the U.S. petroleum market: according to Bloomberg crude oil supplies in the US rose to 352 million barrels, while gasoline inventories fell by 3.11 million barrels to 210.8 million last week. In the recent report the U.S. Ending Stocks of crude oil sharply fell by 7 million barrels to 1,058 million barrels; U.S. Ending Stocks of Total Gasoline on the other hand, rose by 0.64% to 211.4 million barrels (See here the recent petroleum report).
S&P500 / crude oil prices – August update
The S&P500 index inclined again on Tuesday by 0.23%, and completed a 7.93% rally since the beginning of last week. During August the correlation between oil prices and S&P500 was 0.685 for Brent oil and 0.523 for WTI spot oil. This means, as the Stock markets will continue with their rally, 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. The chart below shows the price development of crude oil and S&P500 index during August and the strong correlation they have had during the month.
Current crude oil prices
Major crude oil prices are currently traded down in the European market:
The Nymex crude oil price, short term futures (September 2011 delivery) is traded at $87.97 / barrel, a $0.93/b decrease or 1.05%, as of 12:22*.
The Dated Brent spot oil price declines by $0.24/b to $114.51/ barrel as of 12:33*.
(* GMT)
Thus, the current premium of Brent over WTI is at $26.54/b.
Crude oil price outlook and analysis:
The stock market continues to bounce back from the price drops they have experienced during the first part of August. This rally also helps pull crude oil prices up. Currently, it seems that the ramifications from the recent Hurricane, don’t affect much oil traders’ perspective. In the near future, I still think that WTI oil price will remain around $85-$90 mark and Brent oil around $108-$112, but coming 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):
Today
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
Tomorrow
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
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Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.