Crude oil prices changed direction and slightly inclined yesterday. The depreciation of USD against major currencies such as Euro, AUD and CAD might be among the factors that affected oil prices to trade up yesterday. Today, the EIA oil stockpiles report will be published along with the Canadian Core CPI and the U.S. existing home sales report for August. The FOMC will announce today its decision about its next step in helping jumpstart the US economy
Here’s a short analysis of the crude oil market for today, September 21st:
Crude Oil Prices –September
On Tuesday, September 20th crude oil price (WTI) inclined by 1.39% to $86.89/b; Brent oil price also rose by 0.39% to $112.05/b; during September WTI spot oil fell by 2.16%; Brent oil price decreased by 3.80%. The chart below shows the development of WTI spot oil and Brent oil prices during July up to September.
Premium of Brent over WTI – September Update
The premium of Brent oil over WTI spot oil slightly declined yesterday to $25.16. During September, this premium declined by 9.07%.
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 inclined by 2.57 million barrels. In the last report, for the week ending on September 9th crude oil stocks fell by 5.6 million barrels and reached 1,779.2 million barrels.
On Today’s Agenda:
FOMC Meeting: the two day session of the Federal Open Market Committee will be concluded today; the FOMC is expected to announce it will issue a new stimulus plan. If the FOMC will decide today to issue a stimulus plan it could have an effect on commodities market including crude oil.
Canadian Core CPI: In the recent Canadian statistics report regarding July 2011, the CPI rose by 2.7% in 12 month up to July – this is a lower rate than in June, in which there was a 3.1% growth rate in 12 months; this news could affect traders of CAD and consequently also crude oil prices.
U.S. existing home sales: Following yesterday’s report on the housing starts, today the report about US existing home sales will provide another indicator of the housing market. In the recent report reading July there was a drop in number of homes sold (see here the recent review);
US Housing Starts Declined in August
During August 2011 there was an increase in building permits, but there was a drop in housing starts. Privately owned housing starts fell in August 2011 by 5.0%; the annual rate in August is still 5.8% below the rate in August 2010. This news doesn’t look well for the progress of the housing market in the United States and consequently may reflect in a slowdown in US economy that could also affect its demand for crude oil.
Forex Market and Crude Oil Prices – September Update
The Euro to US dollar exchange rate slightly inclined on Tuesday by 0.12%; during September the Euro/USD completed a 4.64% decrease. The appreciation of US dollar against the Euro and AUD seems connected with the changes of major commodities prices including crude oil prices. If this trend will continue, in which the USD is trade up, it may also affect oil prices to trade down.
U.S. Stock Market / Crude Oil Prices – September Update
The S&P500 index slightly declined yesterday by 0.17% – this was the second consecutive day in which the S&P500 declined; during September, the S&P500 index slipped by 1.38%. During September, there was a strong positive correlation between crude oil prices and S&P500 index. If the US stock markets will decline today, it may adversely affect crude oil prices to decline as well throughout the day.
Current Crude Oil Prices
Major crude oil prices are currently traded with mixed trend in the European market:
The Nymex crude oil price, short term futures (October 2011 delivery) is traded at $86.53/ barrel, a $0.39/b decrease or 0.45%, as of 10:53*.
The Dated Brent spot oil price inclines by $0.78/b to $112.83/ barrel as of 11:03*.
(* GMT)
Thus, the current premium of Brent over WTI is at $26.3/b.
Crude Oil Prices Outlook and Analysis:
Crude oil prices kept zigzagging yesterday as they have been doing during September. The rally of the US stock markets in recent weeks may have helped oil prices to remain high, while the ongoing concerns of a global slowdown as suggested by the recent report of the IMF are likely to pressure crude oil prices to trade down, resulting in opposing forces that drag crude oil prices, as other commodities prices, to different directions. Today’s US housing report and the FOMC meeting decision might affect trading: if the FOMC will come up with a stimulus plan or will surprise traders with an unexpected QE plan this might sharply affect crude oil prices to trade up. On the other hand, another negative housing report might further affect stock markets and even oil prices to trade down. All things being equal In the near future, I still think WTI oil price will trade around $85-$90 and Brent around $110-$115, but for remainder of 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):
Today
13:00 – Canadian Core CPI
15:00 – U.S. existing home sales
15:30 – EIA report about Crude oil inventories
19:15 – FOMC meeting
Tomorrow
09:00 – Euro Area Manufacturing PMI
13:30 – Canada Core retails sales
13:30 –U.S. Unemployment Claims
15:30 – EIA Natural gas storage report
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Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.