Oil Outlook for July 7-11

Oil prices came down again during the past week as the turmoil in Iraq seems to have little impact on the oil market. Last week, the WTI and Brent fell by 1.6% and 2%, respectively.  The difference of Brent oil over WTI slightly contracted again; the premium ranged between $7.37 and $8.43. Will oil prices keep coming down? This week, the IEA and OPEC will release their monthly reports, the U.S JOLTS report, China’s trade balance and the EIA’s oil weekly report.

Here is a weekly outlook for the oil market for July 7th – July 11th:

Oil Prices –July

During the previous week, crude oil price (WTI) fell by 1.6% and reached by Friday $104.06/b; further, Brent oil dropped again by 2% to reach $111.0/b;

In the chart below are the daily shifts in WTI and Brent oil prices during the past several weeks (prices are normalized to April 30th, 2014).

oil forecast Brent and WTI July 7  2014Premium of Brent over WTI – July

The difference between Brent and WTI oilwas in the range between $7.56 and $6.76 per barrel. During the week, the premium narrowed by $0.62 per barrel.

Difference between Brent and WTI July 7 2014Oil Stockpiles, Demand and Supply

The oil stockpiles slipped by 0.44 MB and reached 1,809.51 million barrels. The linear correlation between the changes in stockpiles has declined again to -0.146: this correlation suggests that oil price was less related to the changes in stockpiles. Let’s turn to the changes in supply/demand:

Supply: Oil imports rose by 0.5% during last week. Moreover, oil production edged up by 0.2%; the total supply rallied by 0.3%;

Demand: Refinery inputs increased by 0.3% last week. In total, the demand was slightly below the supply. This recent development may keep oil prices unchanged. The linear correlation between the weekly price of oil lagged by on period and the changes in the gap between supply and demand is mid-strong and negative at -0.258.

The chart below presents the developments in the difference between supply and demand and the price of oil.

oil market tight loose oil price  July 7The next weekly report will be published on Wednesday, July 9th and will refer to the week ending on July 4th.  

OPEC Monthly Report

The OPEC report will show the main developments in crude oil and natural gas’s supply and demand worldwide; the report will also pertain to the shifts in the production of OPEC countries during June 2014;

The next report will be published on Thursday, July 10th.

IEA Monthly Report

This upcoming monthly report will present an updated (for June) outlook and analysis for the global crude oil and natural gas market for 2013 and 2014.

The next report will be published on Friday, July 11th.

Oil Related News for the Week

Here are several news items that could affect the direction of oil prices:

Tuesday – U.S JOLTS Job Openings: The Bureau of Labor Statistics will release its monthly update on the U.S number of job openings during June, excluding the farming industry; in the past report regarding May, the number of jobs opening was 4.46 million;

Thursday – China’s Trade Balance: According to the recent monthly report, China’s trade balance rose to a $35.9 billion surplus; if the surplus expands further, it could indicate China’s economy is improving and thus may positively affect oil prices; 

Oil Outlook and Breakdown

The tensions in Iraq seem to have a lesser impact on oil prices as people believe the developments in the Iraq haven’t had a substantial impact on production. This week’s OPEC report could reveal of any changes to Iraq’s output during last month. In the U.S, the supply slightly expanded mainly due to a rise in imports and a modest gain in production. From the demand side, refinery inputs also rallied. The difference between Brent and WTI remained in range between $6 and $7 and is likely to remain at this range.

I still think, on a weekly scale, the oil market will further cool down.

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