Crude oil prices continued to decline during most of last week. The Brent premium over WTI slightly rose again to $17-$18 range. During the upcoming week there are several publications that may affect the oil market including the U.S non-farm payroll, pending home sales, EU monetary development, U.S GDP for Q1 2012 and U.S jobless claims.
Here is an outlook and a weekly analysis on the crude oil market for May 28th to June 1st:
Oil Prices –May
By Friday, May 25th crude oil price (WTI) edged up by 0.28% and reached $90.66/b; Brent oil also edged up by 0.1% to $107.95/b; during last week, WTI spot oil declined by 0.9% and Brent oil by 0.03%.
In the chart below are the shifts in WTI and Brent oil prices during May (prices are normalized to April 30th). It show how both oil prices have declined during most of the month (UTD).
The difference between Brent oil and WTI spot oil slightly increased during last week, and was in the range of $17-$18 per barrel. During May the premium increased by 16.82%.
U.S. crude oil stockpiles slightly rose last week by 1 million bl. For the week ending on May 11th oil stockpiles reached 1,770.97 million barrels.
The upcoming report will be published on Wednesday, May 30th and will refer to the week ending on May 25th.
Main Oil Related News Items for the upcoming week
Tuesday 02:30 – Australian Retail Sales: The retail sales (seasonally adjusted) rose by 0.9% in March; this news may affect the strength of the Aussie dollar;
Wednesday 15:00 – U.S. Pending Home Sales: in the previous report the pending home sales index rose by 4.1% (M-over-M). These data are another indicator for the development in America’s real estate market; based on last week’s results on housing sales (new and existing) the pending sales may continue to increase;
Thursday 13:30 – Second Estimate of U.S GDP 1Q 2012: In the first estimate the GDP expanded by 2.2% (annual rate). If the second estimate will be much different than the first estimate it could affect forex and commodities (for the first estimate of 1Q GDP).
Thursday 13:30 – U.S. Jobless Claims: in the latest update the jobless claims didn’t change much at 370,000; this upcoming weekly report may affect the U.S dollar and consequently commodities;
Thursday 2:00– China Manufacturing PMI: according to the previous Manufacturing PMI report regarding April 2012 the Manufacturing PMI increased to 53.3;if this upward trend will continue, this may also positively affect commodities rate;
Friday 13:30 – Canada’s GDP by Industry: In the previous report regarding February, the real GDP edged down by 0.2%. This report may affect the strength of the Canadian dollar which is strongly correlated with energy commodities;
Friday 15:00 – U.S. ISM Manufacturing PMI: During April 2012 the index rose to 54.8%, which means the manufacturing is growing at a faster rate; this index might affect forex, crude oil and natural gas markets;
Friday 13:30 – U.S. Non-Farm Payroll Report: in the recent report regarding April 2012, the number of non-farm payroll employment rose by only 115k; this report might affect not only the USD, but also oil prices (see here my last review on the U.S employment report).
Forex and Crude Oil Prices –May
The EURO/USD exchange rate continued its downward trend and decreased last week by 2.07%. Furthermore, the AUD/USD also declined by 0.88%. There are still positive correlations among these exchange rates (EURO/USD, AUD/USD) and oil rate. If the U.S dollar will continue to rise against the EURO and Aussie dollar, it may further adversely affect oil prices.
Oil Prices Outlook and Analysis:
The Brent premium over WTI oil slightly rose again last week but both oil rates have edged down. The fundamentals (from both the demand and supply sides) still seem as if oil market will continue to loosen up.
In the upcoming week the U.S non-farm payroll, GDP for Q1 2012 and manufacturing PMI reports will be published. These reports will presents the developments in U.S economy and may affect commodities prices; if these reports’ rates won’t meet expectations then they may adversely affect oil prices. If the U.S stock market won’t trade up this may adversely affect oil prices. Finally, if major currencies including EURO and Aussie dollar will continue to depreciate against the U.S. dollar, then they may also pull down oil prices.
I speculate during the following week, WTI oil price will trade between $87 and $92 and Brent between $104 and $110.
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