Crude oil prices have bounced back and inclined yesterday along with the rally of major US stock markets. The WTI spot oil rose for the second straight day. Today, the US EIA crude oil stockpiles report will be published and the U.S. report on core Durable Goods.
Here’s a short analysis of the crude oil market for today, August 24th:
Crude oil prices –August
On Tuesday, August 23rd crude oil price (WTI) rose by 1.37% to $85.27/b; Brent oil price also inclined by 1.32% to $110.30/b; during August WTI spot oil declined by 10.88%; Brent oil fell by only 4.86%.
The chart below presents the normalized price development of WTI spot oil and Brent oil during August. It shows the recent rally of Brent and WTI oil prices in past couple of weeks, following the sharp falls they have endured during the first week of August.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil slightly inclined on Tuesday August 23rd to $25.03; during August, this premium rose by 23.60%, mainly because WTI spot oil price declined by a sharper rate than Brent oil price did during the first week of August.
US Petroleum stocks will be published today
The US Energy Information Administration will publish today its weekly report on the U.S. petroleum market: according to the Bloomberg the U.S. Petroleum stockpiles inclined last week by 1.74 million barrels, and U.S. gasoline stocks may have inclined by 6.37 million barrels to 213.9 million barrels (See here the recent petroleum report).
US core Durable Goods
This report will show the changes in orders of durable goods in the U.S. in the manufacturing sector in July. This report indirectly presents the changes in U.S. demand for goods including major commodities such as crude oil. The current expectations for July are of another decline in new orders.
US dollar / crude oil prices – August update
The US dollar and Canadian dollar exchange rate slightly declined yesterday by 0.32%. The correlation between oil prices and major exchange rates vary not only on a monthly scale, but also across exchange rates. During August, the US dollar and Canadian dollar exchange rate shows the strongest negative relation with crude oil prices among all other major exchange rates; i.e. as USD/CAD falls, crude oil prices rise. If the USD/CAD will further fall, it may correlate with the rally of crude oil prices.
S&P500 / crude oil prices – August update
The S&P500 index sharply inclined on Tuesday by 3.43% – the sharpest gain since August 11th. The correlation between oil prices and S&P500 isn’t reliable, but was very strong and positive in recent months including August so far; As seen below, the August correlation reached 0.639 for Brent oil and 0.500 for WTI spot oil. This means, as the Stock market rises, crude oil prices are likely to follow and incline as well. If the S&P500 index will rebound today, it might further pull up crude oil prices.
The rebels seized control of Qaddafi’s compound
The Rebels have conquered Qaddafi’s compound, but there is no news of the exact location of Qaddafi. The oil market continues to disregard this news, mainly because there are early estimates that it will take at least a year and a half until Libya’s crude oil production will resume its normal capacity, because many of the oil infrastructures were damaged or destroyed during recent months.
Before the civil war in Libya commenced, Libya’s oil production rate reached 1.6 million bbl/ during 2010. According to OPEC, the Libyan crude oil production reached only 53 thousand bbl/d during July 2011.
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 $85.23 / barrel, a $0.21/b decrease or 0.25%, as of 10:05*.
The Dated Brent spot oil price declines by $0.1/b to $109.74/ barrel as of 10:17*.
Thus, the current premium of Brent over WTI is at $24.51/b.
Crude oil price outlook and analysis:
The recent rally in the stock market might be one of the factors that affected crude oil prices to trade up; if this rally in the stock markets will continue it may also pull crude oil prices up. In the near future, I still think that WTI oil price will settle 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 – US Department of Commerce – Report on core Durable Goods
15:30 – EIA report about Crude oil inventories
13:30 – Department of Labor report – U.S. unemployment claims
15:30 – EIA report about Natural gas storage
4.05 – Reserve Bank of Australia – Governor Stevens talks
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.