Oil Weekly Outlook For February 25 – March 1

During last week, crude oil prices (WTI & Brent) changed pace and tumbled down: WTI decreased by 2.85%; Brent oil, by 3.78%. As a result, the gap between the Brent oil and WTI shrunk; the difference between Brent and WTI ranged between $20 and $22. Based on the recent EIA report, oil stockpiles fell by 1.2 MB. Will oil continue to fall next week? During the forthcoming week, several publications may affect the oil market. These items include: U.S GDP for Q4, U.S core durable goods, U.S and China’s manufacturing PMI and EIA oil weekly update.

Here is a weekly projection and analysis for the crude oil market for February 25th to March 1st:

Oil Prices – February

During the previous week, crude oil price (WTI) fell by 2.85% and reached by Friday $93.13/b; Brent oil also tumbled down by 3.78% to $114.1/b; during February, WTI oil declined by 4.47%; Brent oil, by 1.25%.

In the chart below are the changes in WTI and Brent oil prices during January-February (rates are normalized to December 30th). As seen below, the prices of oil changed course and declined in recent days.

oil forecast Brent and WTI spot rates February  25 – March 1 2013Premium of Brent over WTI – February

The gap between Brent oil and WTI spot oil has contracted during last week as it ranged between $19 and $22 per barrel. During February the premium rose by 16.11%.

Difference between Brent and WTI  February 25 – March 1  2013Oil Stockpiles – Declined by 1.2 Mb


The oil stockpiles declined by 1.2 MB and reached 1,790.6 million barrels. The linear correlation between the shifts in stockpiles remained mid-strong and negative: this correlation suggests that the price of oil, assuming all things equal, will moderately rise next week. The next report will be published on Wednesday, February 27th and will refer to the week ending on February 22nd.

Main Oil Related News Items for the upcoming week

Wednesday – U.S Core Durable Goods: This report may indirectly indicate the developments in U.S. demand for commodities such as oil. As of December 2012, new orders of manufactured durable goods increased to $230.7 billion;

Thursday – Second U.S GDP 4Q 2012 Estimate: In the previous estimate the U.S GDP contracted by 0.1% in the fourth quarter; in the third quarter the GDP expanded by 2.7%; in the 2Q2012 the GDP growth rate reached 1.7% (annual rate). This presents a drop in the growth rate for the US’s GDP;

Thursday – Philly Fed Manufacturing Index: This survey provides an estimate for the progress of the US manufacturing conditions. In the previous January survey, the growth rate fell from +8.1 in December to -5.8 in January

Thursday – China Manufacturing PMI: According the recent report regarding January 2013 the Manufacturing PMI inched down to 50.4; this means that China’s manufacturing sectors is expanding at a slightly slower pace;

Friday – U.S. Manufacturing PMI: This update will refer to the monthly developments in the national manufacturing sector for February 2013. During January 2013 the index rose to 53.3%, which means the manufacturing is growing;

Foreign Exchange and Oil Prices Relation – February

The EURO/USD also declined last week by 1.24%. The AUD/USD on the other hand inched up by 0.15% during last week. The correlations among these currencies pairs (Euro/USD) and oil prices remained strong and robust. E.g. the linear correlation between the price of oil and EURO /USD was 0.66 during January- February. If the U.S dollar will continue to appreciate against the “risk currencies”, it may adversely affect oil prices.

Oil Prices Outlook and Analysis

Following the sharp fall in the price of crude oil last week, oil prices might change course and bounce back during next week. The difference between Brent and WTI oil ranged between $20 and $22 range and might continue to move in this ballpark in the coming days. Oil stockpiles declined again last week, which could pressure up oil prices in the U.S this week. The upcoming reports on U.S core durable goods, GDP, U.S and China’s manufacturing PMI could affect the path of oil from the projected demand side; if these reports will show growth in economic activities in these countries, they could help rally oil prices. Finally, if major currencies such as the EURO will continue to depreciate against the U.S. dollar, they may adversely affect oil prices. The bottom line, I guess the prices of oil will slightly rise on a weekly scale.

My guess is that WTI oil will trade between $92 and $97 and Brent between $112 and $118 during the week.

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6 comments for “Oil Weekly Outlook For February 25 – March 1

  1. Mike
    February 25, 2013 at 1:00 am

    The last 3 weeks your weekly prediction range for WTI oil were wrong. Why bother?


    • February 25, 2013 at 11:14 am

      Hi Mike,
      Thanks for your comment and I understand your critic and appreciate it. The price range I give is my guess based on the available information I have at the time of writing the post. By the way I have examined my guesses since the beginning of the year and my expected price range was 65% of the time correct. Again I don’t claim I will always be correct but I will give my readers my best effort to provide them with the available information to understand the oil market.


  2. imad
    February 27, 2013 at 4:12 pm

    Hi Sir , Iam following ur analysis since 1 year . yours previous week analysis was wrong but however i have make d profit from ur analysis before.I have got too much advantage from urs analysis.THNX

    • March 1, 2013 at 10:39 am

      Hi Imad,
      Thanks for your kinds words. It is much appreciated.

  3. Alexi
    March 3, 2013 at 9:37 am

    Hi, Lior, that is, of course, very difficult to provide such forecasts. But it will be much more interessting for intraday trader to receive your daily outlooks on oil not only from the fundamentals, but also from the technical point of view. Thank you

    • March 3, 2013 at 10:22 pm

      Hi Alexi, Thanks for your feed back, it’s appreciated. I agree with you that fundamental analysis doesn’t account for the whole movement of prices, but I’m not convince that TA is able to fill the holes. That’s why I’m not using TA in my analysis.

Comments are closed.