Crude Oil Prices – Weekly Outlook August 13-17

Crude oil prices traded up during most of the week; the gap between Brent and WTI also grew. The recent OPEC monthly report revealed a slight decline in the oil production of Iran but the overall OPEC oil production didn’t change much. During last week, WTI oil rose by 1.61%; Brent oil, by 3.68%.

During the upcoming week there are several publications that may affect oil market including the American retail sales, EU GDP, Canada’s CPI and Philly Fed index.

Here is a weekly outlook and analysis of the crude oil market for August 13th to August 17th:

Oil Prices –August

By Friday, August 10th crude oil price (WTI) declined by 0.52% and reached $92.87/b; Brent oil also slipped by 0.29% to $113.57/b; during last week, WTI spot oil increased by 1.61%; Brent oil, by 3.68%.

In the chart below are the developments in WTI and Brent oil prices during August (prices are normalized to July 31st). It show how both oil prices rose during the past couple of weeks.

oil forecast Brent and WTI spot rates  2012 August 13-17

Premium of Brent over WTI – August

The difference between Brent oil and WTI spot oil grew to $18-$20 per barrel range. During August the premium rose by 15.84%.

Difference between Brent and WTI  August 13-17 2012

Oil Stockpiles –Fell by 1 Mb

The oil stockpiles changed direction and declined during the previous week by 1 M bl to reach 1,800.3 million barrels. The upcoming report will be published on Wednesday, August 15th and will refer to the week ending on August 10th.

OPEC’s Oil Production Edged Down in July  

According to the recent August report, OPEC’s oil production decreased to 31,195 thousand bbl/d in July compared with 31,352 thousand bbl/d in June. Saudi Arabia’s oil production slightly declined by 50 thousand bbl/d.  Iran’s oil production declined again by 173 thousand bbl/d and as a result if fell to 2,817 thousand mark – its lowest production level in recent years. On the other hand Iraq’s production rose by 115 thousand bbl/d.

IEA Revised Down its Projection to Oil Demand  

According to the recent report, the global oil demand projection was revised down: it is expected to rise by 0.9 mbbl/d to 89.6 mbbl/d during 2012 compared with 2011′s demand. In 2013 the expected growth is 0.8 mbbl/d to 90.5 mbbl/d.

Main Oil Related News Items for the upcoming week

Tuesday – Euro Area GDP 2Q2012 Report: Euro Stat will also publish the GDP growth rate of the Euro Area. According to the previous report, during the first quarter of 2012, the Euro Area GDP didn’t grow (Q-o-Q). This news might affect the Euro; the current expectations are of another a low growth rate or even another contraction for the second quarter;

Tuesday – Euro Area Industrial Production: This report will show the changes in the industrial production of the EU during June; in the previous report the EU industrial production was up by 0.6% (M-O-M) during May;

Tuesday –U.S. Retail Sales Report: in the recent report regarding June, the retail sales declined by 0.5% from the previous month; gasoline stations sales decreased by 1.8% in June compared to May; this report could signal the changes in U.S’s gasoline demand and thus may affect crude oil prices;

Thursday – Philly Fed Manufacturing Index: This monthly survey measures the manufacturing conditions. In the previous July survey, the growth rate rose from -12.9 in July to -16.6 in June 2012. If the index will remain negative it may adversely affect not only U.S Dollar but also commodities prices (the recent Philly Fed review);

Forex and Crude Oil Prices – August

The EURO/USD exchange rate declined again last week by 0.78%; on the other hand, the AUD/USD also rose by 0.08%. There are still positive relations among these currencies pairs (EURO/USD, AUD/USD) and crude oil rate. E.g. the linear correlation between the oil price and Euro/USD is 0.56 during July/August. If the U.S dollar will depreciate against the EURO and Aussie dollar, it may positively affect oil prices.

Oil Prices Outlook and Analysis

The difference between Brent and WTI oil further expended during last week and may continue on this path during the upcoming week. The upcoming U.S reports including retail sales and Philly Fed index could also affect oil rates. The upcoming EU reports such as GDP for Q2 2012 could also affect crude oil prices. From the supply side, the tensions between U.S and Iran could reduce Iran’s oil production, which could further pressure up oil rates. Finally, if major currencies including EURO and Aussie dollar will rise against the U.S. dollar, then they might also push up oil prices.

I speculate during the upcoming week, WTI oil price will trade between $89 and $95 and Brent between $108 and $116.

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