Crude oil prices changed direction and sharply inclined while major stock markets including the S&P500 rose as well. Currently, crude oil prices are traded with moderate falls. Today, the ECB rate decision will be announced, the EIA natural gas report will be published, the EIA crude oil stockpiles report, and the Canadian and American trade balance reports.
Here’s a short analysis of the crude oil market for today, September 8th:
Crude oil prices –September
On Wednesday, September 7th crude oil price (WTI) sharply rose by 3.86% to $89.34/b; Brent oil price also inclined by 2.25% to $116.19/b; during September WTI spot oil inclined by 0.6%; Brent oil rose by 0.84%.
The chart below shows the normalized prices of WTI spot oil and Brent oil during Mid August up to date (August 15th =100).
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil continues to be high and has reached yesterday $26.85. During September, this premium rose by 1.67%. I explain the reasons for the large gap between Brent oil and WTI spot oil herein.
S&P500 / crude oil prices – September update
The S&P500 index changed direction and sharply inclined yesterday by 2.86%. This is the first increase in the S&P500 index in September. During September the S&P500 index slightly declined by 1.66%. During August- September the correlation between oil prices and S&P500 was 0.71 for Brent oil and 0.51 for WTI spot oil as seen in the chart below. If the Stock markets will continue to rise, crude oil prices are likely to follow and increase as well.
On Today’s Agenda:
US trade Balance report: The American trade balance report for June 2011 showed the goods deficit increased by $2.1 billion compared with May 2011. This report is another indicator of the expansion and contraction in US economy and could affect US dollar and consequently the US stock markets and crude oil prices.
Canadian Trade balance: In the last report exports fell by 1.7%, and imports slipped by 0.21%; as a result, the trade deficit widen to $1.6 billion in June; exports of energy products fell by 5.1%, to $8.7 billion. This report will indicate the changes in exports of energy commodities from Canada and might affect the USD/CAD and consequently crude oil prices.
ECB rate decision: The moderate fall in the Euro Area inflation rate, which reached in July 2.5% (in annual terms) and the slowdown in growth – Euro Area Q2 2011 GDP grew by only 0.2%, are probably the two main factors to pressure Jean Claude Trichet, to cut ECB interest rates. I don’t think he will eventually cut rates in this upcoming decision. In any case, if ECB will keep rates unchanged (high chance), it is likely to lower the Euros to US dollar, and thus may put some pressure on crude oil prices to trade down.
US Petroleum Stockpiles to be published today
The US Energy Information Administration will publish today its weekly report on the U.S. petroleum market: according to Bloomberg, U.S. oil stockpiles fell by 2.25 million barrels. In the last repot, for the week ending on August 26th crude oil stocks reached 1,794.1 million barrels.
Natural gas weekly report
The EIA will also publish today its weekly report regarding the changes in the natural gas market in the US for the week ending on September 2nd.
In the recent report, underground natural gas storage (Billion Cubic Feet) rose by 55 Bcf to 2,961 billion cubic feet for all lower 48 states – the highest stock level since December 31st, 2011.
US Dollar / crude oil prices – September update
The Euro to US dollar exchange rate rose yesterday by 0.71%; the depreciation of US dollar against the Euro might have affected the trade on crude oil, especially WTI oil and may have affected WTI oil price to trade up yesterday. The US dollar also sharply depreciated yesterday against other major currencies including Australian dollar and Canadian dollar – two currencies that are usually strongly linked to the crude oil prices.
Current crude oil prices
Major crude oil prices are currently traded slightly down in the European market:
The Nymex crude oil price, short term futures (October 2011 delivery) is traded at $89.01 / barrel, a $0.33/b decrease or 0.37%, as of 09:38*.
The Dated Brent spot oil price declines by $0.26/b to $115.94/ barrel as of 09:49*.
Thus, the current premium of Brent over WTI is at $26.93/b.
Crude oil price outlook and analysis:
The US stock market indexes sharply inclined yesterday and crude oil prices rose as well. The high correlation between crude oil prices and stock market indexes in recent weeks suggests that the recent gains is more a technical gain than fundamental as traders are regaining their trust in the stock market. In the near future, I still think WTI oil price will remain around $85-$90 mark and Brent oil around $108-$112, but throughout September crude oil prices are likely to moderately decline.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13.30 – Canada building permits
13.30 – Report on American Trade balance
13.30 –Canadian Trade balance
13:30 – ECB conference Trichet speaks and Euro rate decision
13:30 – Department of Labor report – U.S. unemployment claims
15:30 – EIA report about Natural gas storage
15:30 – EIA report about Natural gas storage
3.00 – Chinese CPI
12:00 – Canada unemployment rate and employment report
13:15 – Canadian Housing Starts
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Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.