Crude oil prices didn’t change much yesterday, but the high volatility in the financial markets could spark a shift in this apparent stability in the oil market. Oil stockpiles have declined by 7 million bbl last week in the US. Today, the US unemployment claims report will be published; natural gas weekly market review by EIA. The main even of the week, however will be tomorrow with Bernanke’s speech.
Here’s a short analysis of the crude oil market for today, August 25th:
Crude oil prices –August
On Wednesday, August 24th crude oil price (WTI) slightly fell by 0.34% to $84.98/b; Brent oil price on the other hand slightly inclined by 0.26% to $110.59/b; during August WTI spot oil declined by 11.18%; Brent oil fell by only 4.61%.
The chart below shows 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.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil remains around the $24-$25 mark in the past few days; yesterday it slightly rose to $25.61; during August, this premium rose by 26.47%.
US Oil stockpiles fell by 7 million bbl
The US Energy Information Administration published yesterday its weekly report on the U.S. petroleum market: according to the report the U.S. Ending Stocks of crude oil sharply fell by 7 million barrels and reached 1,058 million barrels; U.S. Ending Stocks of Total Gasoline on the other hand, inclined by 0.64% compared with last week’s stocks; it reached 211.4 million barrels (See here the recent petroleum report).
The chart below presents the petroleum and oil stockpiles compared to the WTI spot oil price during 2010 and 2011.
US core Durable Goods – growth in July
July showed an increase in purchases of manufactured durable goods by or 4% to $201.5 billion; there was an increase in Shipments of manufactured durable goods and Non-defense new orders for capital goods. This report indirectly presents a slight growth in the U.S. demand for goods including major commodities such as crude oil. This news might have contributed to the gains in the stock market, but didn’t seem to have affected much crude oil prices.
S&P500 / crude oil prices – August update
The S&P500 index inclined on Wednesday by 1.31%. During August the correlation between oil prices and S&P500 was 0.690 for Brent oil and 0.508 for WTI spot oil. This means, as the Stock market rises, crude oil prices are likely to follow and increase as well. If the S&P500 index will continue to rise today, it might further pull up crude oil prices.
Gold prices & Silver prices vs. WTI spot oil prices– August update
Gold and silver prices used to have a strong linear correlation with WTI spot oil; these relations weren’t reliable but didn’t change direction. In the pats couple of months, mainly in August, the relation between gold price and crude oil prices (daily percent changes) shifted to a weak negative linear correlation. This could serve as another indication that the recent prices changes in commodities don’t necessarily coincide with the changes that were in previous months.
Current crude oil prices
Major crude oil prices are currently traded slightly up in the European market:
The Nymex crude oil price, short term futures (September 2011 delivery) is traded at $85.83 / barrel, a $0.67/b increase or 0.79%, as of 11:41*.
The Dated Brent spot oil price inclines by $0.77/b to $111.36/ barrel as of 11:53*.
Thus, the current premium of Brent over WTI is at $25.53/b.
Crude oil price outlook and analysis:
The recent rally in the stock market might continue to push up crude oil prices. 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 – 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
09.00 – Monetary developments in the euro area
09:30– US GDP 2Q 2011report
15:00 – Ben Bernanke, Chairman of Fed, speaks
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.