WTI spot oil price fell again yesterday, but it’s currently traded up. OPEC published yesterday its July report and presented an increase in OPEC’s oil production during July. The FOMC kept the US basic interest rate unchanged. Today, the Australian unemployment report will be published, the IEA will issue its monthly report and EIA will report on the US crude oil stockpiles.
Here’s a short analysis and outlook of the crude oil market for today, August 10th:
Crude oil prices –August
On Tuesday, August 9th crude oil price (WTI) declined by 2.47% to $79.30/b; Brent oil price on the other hand rose by 0.62% to $104.10/b; during August Brent oil declined by 10.2%; WTI spot oil fell by 17.2%.
The chart below presents the prices of WTI spot oil and Brent oil during July and August. It shows the sharp falls of crude oil prices during the first week of August.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil rose very sharply in the past few days as it reached yesterday August 9th to $24.8/b; during August this premium rose by 22.47%, mainly because WTI spot oil price declined at a sharper rate than Brent oil price did. This finding suggests that the crude oil market in Europe is still tighter than in the US.
US Petroleum stocks will be published today
The US Energy Information Administration will publish today its weekly report on the U.S. petroleum market: according to the Bloomberg the U.S. Petroleum and oil stocks declined during last week by 5.21 million barrels to 348.6 million barrels; this decline will be a shift from the recent pileup in oil stocks (See here the recent petroleum report).
S&P500 / crude oil prices – August update
The S&P500 along with other stock indexes from around the world fell very sharply on Monday, but then bounced back and sharply inclined yesterday; if the stock market will resume its downward trend it may further pull down major energy commodities prices including crude oil prices. The correlation between oil prices and S&P500 isn’t reliable but in August so far was very strong; the chart below shows the in sync movement of the S&P500 index with crude oil prices.
OPEC raised its oil production in July
OPEC’s crude oil production inclined by 404 thousand bbl/d during July to 30,069 thousand bbl/d; the rise was mainly due to the increased oil production by Saudi Arabia by 255 thousand bbl/d to nearly 9.75 million bbl/d – its highest oil production quota in 2011, and Angola that also raised its oil production quota by 240 thousand bbl/d during July compared to June’s. This finding is probably one of the reasons for the decline of crude oil prices.
Federal Reserve kept rate unchanged
The FOMC kept US basic interest rate unchanged. The FOMC projected that the US economy will have a slow paced recovery, but the US inflation rate is expected to settle as energy commodities prices have came down. The FOMC didn’t elaborate or hinted of any QE3 in the near future. This news is probably among the reason why many consider that the oil demand won’t incline as it used to during this driving season. Therefore this projection might indicate that the growth in crude oil demand in the US will settle down.
Chinese trade balance rose
According to Bloomberg, China’s trade surplus reached $31.5 billion – the highest surplus level in more than two years. This means that the recent economic turmoil in Europe and US has yet to reach China, leaving its economic growth robust. This will likely to keep China’s crude oil demand growth rate will continue to be high and keep global crude oil prices high.
US dollar / Crude oil prices – August update
On Tuesday, Euro to US dollar exchange rate inclined by 1.4%; the US dollar to Canadian dollar sharply fell by 1.73%; the Australian dollar to US dollar rose by 1.64%. This means that US dollar very sharply depreciated against major currencies; this direction isn’t inline with the falls of WTI spot oil but it is in line with the gains on Brent oil price; if the US dollar will continue to depreciate it’s likely to drive crude oil prices up.
Current crude oil prices
Major crude oil prices are currently traded sharply up in the European market:
The Nymex crude oil price, short term futures (September 2011 delivery) is traded at $82.47 / barrel, a $3.17/b increase or 4.00%, as of 12:54*.
The Dated Brent spot oil price inclines by $1.92/b to $106.02/ barrel as of 13:05*.
Thus, the current premium of Brent over WTI is at $23.55/b.
Crude oil price outlook and analysis:
Crude oil prices have declined very sharply during August over the concerns of the US credit rating economic growth and the effect of the falls in the US stock markets. Eventually crude oil prices are likely to bounce back if the US dollar will depreciate, the US stock markets will rise and China’s robust oil demand. On the other hand, it’s not likely that oil prices will bounce back to the high price levels they were at during June and July because the oil market, at least in the US, is further loosening up. I speculate that crude oil prices will continue to come down and will settle around the $80-$85 mark for WTI spot oil and $100-$107 for Brent oil.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
Tentative –IEA monthly oil report
15:30 – EIA report about Crude oil inventories
2:30 – Australia rate of unemployment
9.00 – ECB monthly bulletin
13.30 – Report on American Trade balance
13.30 –Canadian Trade balance
13:30 – Department of Labor report – U.S. unemployment claims
15:30 – EIA report about Natural gas storage
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.