Crude oil prices ended the week with sharp falls as the U.S. stock market sharply declined and the Euro/USD declined over the recent Euro Area high inflation rate for September. Currently, crude oil prices are traded down. Today, Australia’s Trade Balance report will be published, and U.S. ISM Manufacturing PMI index.
Here’s a short analysis of the crude oil market for today, October 3rd:
Crude Oil Prices – September/ October
On Friday, September 30th crude oil price (WTI) sharply decreased by 3.58% to $79.20/b – the lowest price level since September 29th; Brent oil price also declined by 2.05% to $104.26/b; during September WTI spot oil fell by 10.82%; Brent oil price decreased by 10.49%.
The chart below shows the prices development of WTI spot oil and Brent oil in the past three months – July up to September.
Premium of Brent over WTI – September/ October Update
The premium of Brent oil over WTI spot oil slightly inclined on Friday to $25.06. During September, this premium declined by 9.43%.
On Today’s Agenda:
U.S. ISM Manufacturing PMI: This report will show the monthly change in manufacturing sector on a national level during September 2011. In August the index slightly declined to 50.6%; this index might affect traders of crude oil and natural gas (see here my review of last report);
Australian Trade Balance: The upcoming report will refer to August 2011. In the July 2011 report, there was a rise in export of non-monetary gold by $596 million (82%); if the gold exports will show an increase in August, it might suggest an increase in demand for non-monetary gold that could explain the changes in gold prices (see here last report);
Forex Market and Crude Oil Prices – September/ October
The Euro to US dollar exchange rate sharply declined on Friday by 1.54%; many consider the increase in the Euro Area annual inflation in September to be among the factors that contributed to this sharp fall in EURO/USD. During September the Euro/USD completed a 6.83% decrease. The USD also appreciated on the last day of September against the AUD, and CAD which are historically strongly related to daily percent changes in crude oil prices. If US dollar will continue to appreciate against the Euro, CAD and AUD, they may affect crude oil prices to decrease.
U.S. Stock Market / Crude Oil Prices – September/ October
The S&P500 index also sharply declined on Friday by 2.51%. During September, the S&P500 index decreased by 7.18%. During September, there was a strong positive correlation between crude oil prices and S&P500 index (e.g. for WTI it was 0.665 and for Brent oil it was 0.543). If the US stock markets will continue to fall as they did on Friday, they may further affect crude oil prices to decline throughout the day.
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 $78.28/ barrel, a $0.92/b decrease or 1.16%, as of 10:43*.
The Dated Brent spot oil price declines by $1.67/b to $102.59/ barrel as of 10:55*.
Thus, the current premium of Brent over WTI is at $24.31/b.
Crude Oil Prices Outlook and Analysis:
Crude oil prices closed the month with sharp falls and currently they continue their downward trend and keep on falling. The sharp fall in the US stock markets in Friday and the depreciation of the Euro, CAD and AUD against the USD are probably among the factors that contributed to the decline of crude oil prices on Friday. If this trend will continue, in which major currencies will devalue against the USD and the stock markets will decline, it could also contribute to the decline in crude oil prices throughout the day. I speculate that WTI oil price will remain around $75-$82 and Brent oil price around $102-$108 during the first week of October.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
15:00 – U.S. ISM Manufacturing PMI
2:30 – Australian Trade Balance
5:30 – Reserve Bank of Australia – Cash Rate Decision
14:00 – ECB conference Trichet speaks
15:00 – Bernanke Testifies
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.