Crude Oil Prices – Weekly Outlook September 24-28

During last week, crude oil prices changed direction from their upward trend during August and the beginning of September and tumbled down throughout most of the week. The difference between Brent and WTI slightly increased but remained at its $17-$19 range. During last week, WTI oil declined by 6.5%; Brent oil, by 4.5%. The oil stockpiles rose during last week by 11.4 M bl.

During the upcoming week there are several reports and events that may affect the oil market including: U.S GDP for Q2 2012, core durable goods, U.S consumer confidence and U.S new and pending home sales.

Here is a weekly outlook and analysis of the crude oil market for September 24th to 28th:

Oil Prices –September

During last week, crude oil price (WTI) declined by 6.5% and reached by Friday $92.61/b; Brent oil also decreased by 4.5% to $112.29/b; during the month, WTI spot oil fell by 4%; Brent oil, by 2.75%.

In the chart below are the shifts in WTI and Brent oil prices during the past several weeks (prices are normalized to August 31st). As seen, oil prices have changed direction and tumbled down during last week.

oil forecast Brent and WTI spot rates  2012 September 23

Premium of Brent over WTI – September

The difference between Brent oil and WTI spot oil slightly increased but remained at the $17-$19 per barrel range. During the month the premium rose by 3.6%.

Difference between Brent and WTI  September 23 2012

Oil Stockpiles –Rose by 11.4 Mb


The oil stockpiles increased during the previous week by 11.4 M bl to reach 1,801 million barrels. The upcoming report will be published on Wednesday, September 26th and will pertain to the week ending on September 20th.

Main Oil Related News Items for the upcoming week

Tuesday – Retails Sales Canada: This report may affect the direction of USD/CAD exchange rate, which is strongly linked with commodities prices. In the previous report regarding June, retails sales declined by 0.4%;

Tuesday – U.S Consumer Confidence: according to the recent monthly update, the consumer confidence index fell in August (M-o-M). The current expectations are that the July index may rise; this report might affect commodities markets;

Wednesday – U.S. New Home Sales: in the previous report the sales of new homes rose to an annual rate of 372,000 – a 3.6% gain (month over month); if the number of home sales will continue to rise, it may further indicate a sign of some recovery in the U.S real estate market;

Thursday – U.S Core Durable Goods: This report may indirectly show the changes in U.S. demand for commodities. As of July, new orders of manufactured durable goods rose by $9.4 billion to $230.7 billion; if this report will continue to be positive then it could pull up not only the US dollar but also commodities;

Thursday – Final U.S GDP 2Q 2012 Estimate: In the recent estimate the U.S GDP in the second quarter grew by 1.7%; in the 1Q2012 the GDP growth rate was 1.9%. This shows a decrease in the growth rate for the US’s GDP. If there will be a sharp shift in this estimate it could also affect not only the USD but also commodities (for the previous estimate of US 2Q GDP).

Foreign Exchange and Oil Prices Relation – September

The EURO/USD currency pair also fell last week by 2.43%; further, the AUD/USD also rose by 1.6%. These rises, however may have helped to pull up the prices of oil. Further, there are still positive correlation among these currencies pairs (EURO/USD, AUD/USD) and crude oil price. E.g. the linear correlation between the price of oil and Euro/USD was 0.62 during August- September. If the U.S dollar will continue to fall against the EURO and Aussie dollar, it may rally oil prices.

Oil Prices Outlook and Analysis

The difference between Brent and WTI oil edged up during last week and may continue to edge up during the upcoming week. Oil stockpiles rose last week by a higher than anticipated rate, which could suggest that oil prices in the U.S will continue to trade down this week. The upcoming U.S reports including U.S GDP and core durable goods could affect oil rates. The sharp fall in oil prices might result in a correction during this week. Finally, if major currencies including EURO and Aussie dollar will further depreciate against the U.S. dollar, then they may also pull down oil prices. The bottom line is that I suspect oil prices might recover from last week’s tumble but not by much.

I speculate during the upcoming week, WTI oil will trade between $90 and $95 and Brent between $110 and $114.

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