Crude oil prices shifted to red as they have declined yesterday along with the rest of the financial markets including the American and European stock markets. The lower than expected quarterly growth of the China’s GDP may have contributed to these falls along with the ongoing speculation regarding the Euro-Area debt crisis. Currently crude oil prices are traded down. Today, U.S. Producer Price Index will be published; the U.S. TIC Long Term Purchases report and the Chairman of the Fed will give a speech.
Here’s an outlook and analysis of the crude oil market for today, October 18th:
Crude Oil Prices – October Update
On Monday, October 17th crude oil price (WTI) slightly fell by 0.48% to $86.38/b; Brent oil price sharply fell 3.31% to $111.68/b; during October WTI spot oil rose by 5.51% and Brent oil price by 5.94%.
The chart below presents the prices development of WTI spot oil and Brent oil during October (normalized prices Sept 30=100).
Premium of Brent over WTI – October Update
The premium of Brent oil over WTI spot oil sharply fell on Monday to $25.30. During October the premium sharply inclined by 7.43%.
China’s GDP Growth Rate Slipped in Q3 2011 to 9.1%
The GDP of China increased in the third quarter by 9.1% in annual terms. This is a decrease in the growth rate from the previous quarter as the GDP grew by 9.7% and 9.5% in the first and second quarters (in annul terms), respectively. This news may have been among the factors that contributed to yesterday’s falls in the commodities markets.
On Today’s Agenda:
U.S. TIC Long Term Purchases: The Treasury International Capital report will present the main changes in the purchases and sales of US long term treasuries in August (see here my last review of July 2011);
Bernanke Speaks: following the announcement of FOMC plan to purchase LT securities and to sell ST securities, the Chairman of the Fed is likely to address the economic outlook of the FOMC and his speech may affect commodities traders;
Forex Market and Crude Oil Prices – October
The Euro/USD exchange rate declined on Monday by 1.04%. Furthermore, the USD also appreciated against the AUD, CAD and GBP. The speculation around the European crisis continues to affect the forex and commodities markets. If the U.S dollar will appreciate against the risk currencies (AUD, CAD) as it did yesterday, this may also affect crude oil prices to decrease.
U.S. Stock Market / Crude Oil Prices – October
The S&P500 index dropped on Monday by 1.94% to 1,200.86. During recent months there was a strong positive correlation between crude oil prices and S&P500 index (e.g. for WTI it was 0.568 and for Brent oil it was 0.586 in October (UTD), as seen in the chart below.
The rally of the US stock markets in recent weeks seems to have contributed to the rally of crude oil prices as seen in the graph below.
If the U.S stock market will continue to rise, it may further affect crude oil prices to incline as well.
Current Crude Oil Prices
Major crude oil prices are currently traded down in the European market:
The Nymex crude oil price, short term futures (November 2011 delivery) is traded at $86.13/ barrel, a $0.25 /b decrease or 0.29%, as of 11:47*.
The Dated Brent spot oil price declines by $0.66/b to $111.02/ barrel as of 11:59*.
Thus, the current premium of Brent over WTI is at $24.89/b.
Crude Oil Prices Outlook and Analysis:
The recent news from China may have pushed crude oil prices down yesterday. The speculation revolving the next step of the Euro leaders in resolving the debt crisis will continue to influence the financial markets including crude oil market. I still speculate that during the week WTI oil price will settle around $85-$92 mark and Brent oil price around $108-$115.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
13:30 – U.S. Producer Price Index
14:00 – U.S. TIC Long Term Purchases
18:15 – Bernanke Speaks
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.