The price of oil (WTI and Brent) continued to fall during last week: WTI decreased by 1.19%; Brent oil, by 1.20%. As a result, the gap of Brent oil over WTI remained nearly unchanged: The premium ranged between $8.63 and $10.30. The EIA didn’t publish its weekly update last week, but will publish both last week’s and this week’s report. Will oil resume its downward trend next week? This week, several reports may move the oil market. These items include: U.S non-farm payroll report, U.S new and existing home sales, China manufacturing PMI index, and EIA oil weekly reports.
Here is a weekly forecast and analysis for the oil market for October 21st to October 25th:
Oil Prices – October Update
During last week, crude oil price (WTI) declined by 1.19% and reached by Friday $100.81/b; further, Brent oil also fell by 1.2% to $109.94/b;
In the chart below are the daily shifts in WTI and Brent oil prices during the past several months (prices are normalized to January 31st). As seen below, oil prices slightly fell last week.
Premium of Brent over WTI – October
The gap between Brent and WTI oil remained nearly unchanged last week as it ranged between $8.63 and $10.30. per barrel. During the week, the premium slipped by $0.13 per barrel.
EIA weekly update
Last week’s reports didn’t come out. This week, the report for October 11th will be published on Monday and the report for October 18th will come out on Wednesday.
Oil Related News for the Week
Here are several news items that could influence oil investors:
Tuesday – U.S. Non-Farm Payroll Report: In the previous employment report for August 2013, the labor market slightly expanded: The number of non-farm payroll employment increased by 169k – lower than the number many had expected; if the employment increase again by over 150 thousand (in additional jobs), this may pull up oil prices;
Wednesday – China Manufacturing PMI (flash): HSBC will come out with its flash manufacturing PMI survey for October. Last month’s report regarding September 2013 the Manufacturing PMI rose again to 51.2 – i.e. China’s manufacturing sectors is growing at a slightly faster pace. If in the upcoming report the PMI continues to rise, it could signal growth in China’s economy. This may also positively affect commodities rates;
Thursday – U.S. New Home Sales: In the previous report (opens pdf; for August), the sales of new homes rose to an annual rate of 421,000 – a 7% rise (month-over-month); if the number of home sales continue to increase, this may suggest the housing market in the U.S is reheating;
Oil Outlook and Breakdown
Since the EIA didn’t publish its weekly report, we have limited information regarding the progress of U.S oil market. This week’s EIA reports will shed some light on the changes from the supply and demand side. In any case, the ongoing loosening of the U.S oil market in recent weeks may progress, which could keep oil prices falling down. This, in turn, may slowly expand the gap between WTI and Brent oil prices to double digit numbers. Looking forward, the upcoming reports related to U.S and China could offer some additional information regarding the potential growth in demand for oil. These reports include China’s manufacturing PMI, and employment reports. If these reports exceed expectations, they may positively affect oil prices. Finally, as long as there are little eruptions in the Middle East, the U.S market continues to loosen and Asia’s expected growth doesn’t dramatically change, oil prices are likely to slowly fall.
The bottom line, on a weekly scale, I guess oil price (WTI) will continue to slowly decline.
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