The prices of crude oil (both WTI and Brent) didn’t do much during last week: WTI increased by 0.45%; Brent oil slipped by 0.27%. As a result, the gap between the Brent oil and WTI shrank again; the premium of Brent over WTI ranged between $7 and $8. According to the latest EIA report, oil stockpiles rose by 3.5Mb. Moreover, refinery inputs and production increased while imports fell during last week. The rise in oil supply may pull down the rates of oil. OPEC’s recent monthly update showed the production remained robust. Will oil fall next week? In the upcoming week, several publications may affect the oil market. These items include: Philly Fed index, U.S retail sales, EU GDP, IEA monthly report, and EIA oil weekly update.
Here is a weekly outlook and analysis for the crude oil market for May 13th to May 17th:
Oil Prices – May
During last week, crude oil price (WTI) slightly rose by 0.45% and reached by Friday $96.04/b; conversely, Brent oil slightly decreased by 0.27% to $103.91/b; during May, WTI oil increased by 2.76%; Brent oil, by 1.50%.
In the chart below are the changes in WTI and Brent oil prices during February to May (prices are normalized to January 31st). As seen below, the oil prices have slightly rose in recent weeks.
Premium of Brent over WTI – May
The difference between Brent oil and WTI spot oil contracted again to the range between $7 and $8 per barrel. During May, the premium declined by 11.67%.
Oil Stockpiles –Rose by 3.5Mb
The oil stockpiles rose by 3.5 MB and reached 1,795.6 million barrels. The linear correlation between the changes in stockpiles has slightly weakened and reached -0.18: this correlation suggests that the price of oil, assuming all things equal, will decline next week.
Oil imports to the U.S slipped by 0.4% last week. The weekly changes in oil imports have a mid-strong negative relation (-0.316) that suggest oil prices may rise next week. Oil production, on the other hand, increased again along with refinery inputs during last week. In other words, the rise in production and refinery inputs might suggest the oil market has slightly loosened in the U.S.
The next weekly report will be published on Wednesday, May 15th and will refer to the week ending on May 10th.
OPEC’s Production Slightly Rose in April
According to the latest OPEC Report, OPEC’s oil production rose by 277 thousand bbl/d to reach 30,459 in May. This news suggests the oil supply has slightly rose during last month, which could have loosened the oil market in recent weeks. If this trend will continue, it could further pressure down the price of oil.
IEA Monthly Report
This upcoming monthly report will present an updated (for April) outlook and analysis for the global crude oil and natural gas market for 2013 and 2014.
The next report will be published on Tuesday, May 14th.
Main Oil Related News Items for the upcoming week
Wednesday –EU First Quarter GDP 2013: during the fourth quarter of 2012, EU’s economy contracted by 0.6%; if the EU economy will continue to shrink this could adversely affect the Euro;
Thursday – Philly Fed Manufacturing Index: This monthly survey shows an estimate for the growth of the US manufacturing sectors. In the recent April survey, the growth rate slightly fell from 2.0 in March to 1.3 in April. If the index will increase it may positively affect commodities markets (the previous Philly Fed review);
Foreign Exchange and Oil Prices Correlations – May
During last week, the EURO/USD declined by 0.95%; the AUD/USD also tumbled down by 2.85%. The correlations among these currencies pairs (AUD /USD) and oil prices remained robust and positive. E.g. the linear correlation between the price of oil and AUD /USD was 0.62 during April/May. If the U.S dollar will depreciate against “risk currencies”, this could pressure up oil prices.
Oil Prices Outlook and Analysis
From the supply side, the rise in refinery inputs and production in the U.S might pull down oil prices. Moreover, the buildup in storage is another indication for a rise in supply or a decline in demand, which could also suggest that oil market is loosening up in the U.S. On the other hand, the recent fall in imports is likely to curb the decline in oil prices. OPEC’s recent monthly update showed the oil production remained stable and robust. The upcoming IEA report might shed some light on the changes in the non-OPEC supply and the projected global demand for oil. From the demand side, the upcoming reports regarding U.S retail sales, Philly fed survey, and EU GDP might provide an update to the expected developments from demand sides. If the reports will show a slowdown in EU or U.S, they could pull down the prices of oil. The gap between Brent and WTI oil ranged between $7 and $8 and might continue its contraction in the coming weeks. Finally, if major currencies such as the EURO and Aussie will change course and appreciate against the U.S. dollar, they may pull up oil prices. The bottom line, I guess the prices of oil will slightly decline next week.
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