Crude oil prices continued their October rally as the major financial markets are traded up including the S&P500 and Dow. Currently crude oil prices are traded up. Today China’ GDP for Q3 2011 will be published.
Here’s an outlook and analysis of the crude oil market for today, October 17th:
Crude Oil Prices – October Update
On Friday, October 14th crude oil price (WTI) sharply rose by 3.05% to $86.80/b; Brent oil price also added 2.99% to its value and settled at $115.50/b; during October WTI spot oil rose by 6.02% and Brent oil price by 9.56%.
The chart below presents the prices development of WTI spot oil and Brent oil during October (normalized prices Sept 30=100). It shows the rally in crude oil prices in recent weeks.
Premium of Brent over WTI – October Update
The premium of Brent oil over WTI spot oil sharply inclined on Friday to $28.70. During October the premium sharply inclined by 21.87%.
On Today’s Agenda:
China Third quarter GDP: during the second quarter of 2011, China grew by 9.5% in annual terms; the current expectations are that the Q3 2011 grew in yearly terms by 9.2%; this slowdown is probably due to the recent raises in the interest rate and loans restrictions by the People Bank of China;
U.S Retail Sales Increased in September – October Report
The U.S. retail sales showed that during September sales grew by 1.1% compared with August’s sales. The gasoline stations sales were 20.3% higher in September 2011 than a year earlier and 1.2% higher than in August. Total sales of gasoline in the past nine month in 2011 reached $403.045 billion (not adjusted for seasonality) – an increase of 19.5% from the parallel time in 2010. This news may have helped crude oil prices to rise on Friday.
Forex Market and Crude Oil Prices – October
The Euro/USD exchange rate inclined on Friday by 0.75%. Furthermore, the USD sharply depreciated against the AUD, CAD and GBP. The speculation around the European crisis continues to affect not only the forex markets but also the crude oil market. If the U.S dollar will depreciate against the risk currencies (AUD, CAD) as it did during most of October, this may also affect crude oil prices to increase.
U.S. Stock Market / Crude Oil Prices – October
The S&P500 index bounced back on Friday and added 1.74% to 1,224.58. During recent months there was a strong positive correlation between crude oil prices and S&P500 index (e.g. for WTI it was 0.559 and for Brent oil it was 0.442 in October (UTD). If the U.S stock market will continue to rally, it may further affect crude oil prices to rise.
Current Crude Oil Prices
Major crude oil prices are currently traded up in the European market:
The Nymex crude oil price, short term futures (November 2011 delivery) is traded at $87.84/ barrel, a $1.04 /b increase or 1.20%, as of 08:46*.
The Dated Brent spot oil price inclines by $0.66/b to $116.17/ barrel as of 08:57*.
Thus, the current premium of Brent over WTI is at $28.33/b.
Crude Oil Prices Outlook and Analysis:
Crude oil prices continue to rally even if they take detours along the way; the rally in the financial markets mainly the stock markets provides the back-wind for crude oil prices to increase. As long as the light optimistic sentiment will continue in the financial markets in regards to the European debt crisis, crude oil prices are likely to rise. Furthermore, it will seem that the Brent oil price will rise by a larger scale than WTI oil prices resulting in the spread between them widening. I speculate that WTI oil price will revolve around $85-$92 mark and Brent oil price will be around $110-$120 during the week.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
2:30 – Monetary Policy Meeting Australia’s Bank
03:00 –China Third quarter GDP
For further reading:
- Weekly Outlook for October 17-21
- Crude Oil Prices – Weekly Recap 10-14 October
- Natural gas prices outlook for October 2011
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.