Crude oil prices started off the week falling but by the end of the week they have changed direction and hiked following the better than expected non-farm payroll report. The decisions of the major central banks including FOMC and ECB to keep their respective monetary policy unchanged may have contributed to the fall of oil prices at the first few days of the week. During the week, WTI oil rose by 1.41%; Brent oil, by 1.5%.
During the upcoming week there are several publications that may affect oil market including the American trade balance, China’s CPI, Canada’s trade balance. OPEC and IEA monthly updates and EIA weekly oil report.
Here is a weekly outlook and analysis of the crude oil market for August 6th to August 10th:
Oil Prices –August
By Friday, August 3rd crude oil price (WTI) hiked by 4.9% and reached $91.4/b; Brent oil also rose by 2.96% to $109.54/b; during last week, WTI spot oil increased by 1.41%; Brent oil, by 1.5%.
In the chart below are the changes in WTI and Brent oil prices during July and August (prices are normalized to June 29th). It show how both oil prices zigzagged during the past couple of weeks.
The gap between Brent oil and WTI spot oil grew to $17-$19 per barrel range. During August the premium rose by 1.51%.; U.S. Petroleum stockpiles reached 1,801.3 million barrels.
The oil stockpiles changed direction and declined during the previous week by 7.2 M bl. The upcoming report will be published on Wednesday, August 8th and will refer to the week ending on August 3rd.
OPEC’s Monthly Report
This report will refer to the changes in the production of OPEC countries during July 2012; this news may affect oil prices (See here a summary of the previous July report); if there will be a sharp drop in the oil production it could pressure up oil prices.
The upcoming report will be published on Thursday, August 9th and will refer to June.
IEA Monthly Report
This report will show an updated outlook and analysis for the global crude oil market for 2012 and 2013 (See here a summary of the recent report);
The upcoming report will be published on Friday, July 10th.
Main Oil Related News Items for the upcoming week
Monday – Bernanke’s Speech: Following last week’s FOMC decision to keep monetary policy unchanged, the markets will continue to look for hints in regards to the future steps of the FOMC. The title of the speech is “Economic Measurement “;
Wednesday – Chinese CPI: in June the Chinese inflation rate declined to an annual rate of 2.2%; this rate is below China’s inflation target of 4% in annual terms. If the inflation will continue to dwindle it could indicate that China’s economic progress continues to slow down;
Thursday –American Trade Balance: This monthly report for June 2012 will present the recent changes in imports and exports of goods and services to and from the U.S, including commodities such as oil; according to the previous American trade balance report regarding May 2012 the goods and services deficit declined during the month to $48.7 billion.
Friday –China’s Trade Balance: according to the latest report, China’s trade balance rose from a $18.7 billion surplus to a $31.7 billion surplus; if the surplus will further rise, it could indicate that China’s economic growth is progressing and thus may positively affect prices of oil;
Forex and Crude Oil Prices – August
The EURO/USD exchange rate increased again last week by 0.52%; furthermore, the AUD/USD also rose by 0.82%. 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 0.61 during July/August. If the U.S dollar will continue to depreciate against the EURO and Aussie dollar, it may positively affect oil prices.
Oil Prices Outlook and Analysis
The gap between Brent and WTI oil further grew during last week and may continue so during the upcoming week as the oil market in the U.S continues to loosen up compared to the European oil market. If the Bernanke won’t make any announcements or hint on the future steps of the FOMC this could adversely affect oil rates. The upcoming U.S reports including trade balance report could also affect oil rates. From the supply side, the tensions between U.S and Iran could reduce Iran’s oil production rate; the upcoming OPEC report could show if there was a decline in Iran’s oil production. The IEA will also update its projection to the oil demand. Finally, if major currencies including EURO and Aussie dollar will continue to trade up against the U.S. dollar, then they might also pull up oil prices.
I speculate during the upcoming week, WTI oil price will trade between $87 and $93 and Brent between $105 and $111.
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