Crude oil prices started September with moderate falls, which is consistent with the declines in the major stock markets including the S&P500. Yesterday the spread between Brent oil and WTI oil reached a new high. Currently, crude oil prices are traded sharply up as the US Stock market is traded up. Tomorrow, President Obama will seek from Congress $300b for a job expanding program. Today, the Australian unemployment report will be published, and Canada overnight rate decision. The EIA crude oil stockpiles weekly report will be published tomorrow.
Here’s a short analysis of the crude oil market for today, September 7th:
Crude oil prices –September
On Tuesday, September 6th crude oil price (WTI) finished with a 0.50% decline to $86.02/b; Brent oil price on the other hand inclined by 0.59% to $113.63/b; during September WTI spot oil declined by 3.14%; Brent oil fell by only 1.38%.
The chart below shows the normalized prices of WTI spot oil and Brent oil during Mid August up to date (August 15th =100).
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil continues to soar and has reached yesterday $27.61 – a new record high. During September, this premium rose by 4.52%. I explain the reasons for the rise in the gap between Brent oil and WTI spot oil herein.
Obama seek $300 billion job expansions program
President Obama is planning the address Congress tomorrow, and ask for an approval of a $300 billion job creating program via tax cuts, infrastructure building and aids to local governments. This program will be set to 2012. This stimulus plan is following the disappointing US labor report of August in which there were no jobs added to the economy. It’s not clear yet, even if this program will be approved (and it’s a big if), will it help jumpstart a $15 trillion economy.
On Today’s Agenda:
Canada overnight rate: The BOC may keep the rate unchanged, despite the slight increase in inflation rate to 2.7% (in annul terms). This decision could affect the CAD/USD; there are strong correlations among the Canadian dollar and major commodities that export including crude oil and natural gas;
US Petroleum Stockpiles to be published tomorrow
The US Energy Information Administration will publish tomorrow (usually today) its weekly report on the U.S. petroleum market: according to Bloomberg, U.S. oil stockpiles fell by 2.25 million barrels. In the last report, for the week ending on August 26th crude oil stocks reached 1,794.1 million barrels.
S&P500 / crude oil prices – September update
The S&P500 index fell again for the third straight business day, yesterday (Tuesday, September 6th) by 0.74%, and completed a 4.4% drop since the beginning of September. 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 to decline, crude oil prices are likely to follow and decrease as well.
US Dollar / crude oil prices – September update
The Euro to US dollar exchange rate fell yesterday by 1.46%; this ongoing appreciation of US dollar against the Euro might have affected the trade on crude oil, especially WTI oil and may have caused WTI oil price to trade down yesterday. The US dollar also sharply appreciated yesterday against other major currencies including Australian dollar and Canadian dollar – two currencies that are usually strongly linked to the crude oil prices.
Current crude oil prices
Major crude oil prices are currently traded with mixed trend in the European market:
The Nymex crude oil price, short term futures (October 2011 delivery) is traded at $86.90 / barrel, a $0.88/b increase or 1.02%, as of 11:47*.
The Dated Brent spot oil price declines by $0.54/b to $113.09/ barrel as of 11:47*.
Thus, the current premium of Brent over WTI is at $26.19/b.
Crude oil price outlook and analysis:
The US stock market indexes fell in recent days as traders are regaining their trust in the stock market; these falls also likely to pressure crude oil prices to decline. In the near future, I speculate WTI oil price will remain around $85-$90 mark and Brent oil around $108-$112, but throughout the month crude oil prices are likely to moderately decline.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
14.00 – Canada overnight rate
15:30 – EIA report about Crude oil inventories
2:30 – Australia rate of unemployment
13.30 – Canada building permits
13.30 – Report on American Trade balance
13.30 –Canadian Trade balance
13:30 – ECB conference Trichet speaks and Euro rate decision
13:30 – Department of Labor report – U.S. unemployment claims
15:30 – EIA report about Natural gas storage
3.00 – Chinese CPI
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.