Crude oil prices changed direction again and slightly fell yesterday despite their recent upward trend in recent week. The shift might be related, in part, to the recent fall in the stock market, including the S&P500. Crude oil prices are currently traded with moderate rises. Today, the following reports will be published: the EIA crude oil stockpiles report; U.S. producer pride index; Euro AREA CPI; and Japanese trade balance.
Here’s a short analysis and outlook of the crude oil market for today, August 17th:
Crude oil prices –August
On Tuesday, August 16th crude oil price (WTI) changed direction and fell by 1.4% to $86.65/b; Brent oil price also slightly declined by 0.2% to $109.55/b; during August WTI spot oil declined by 9.44%; Brent oil fell by 5.5%.
The chart below presents the price developments of WTI spot oil and Brent oil during July and August.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil slightly inclined on Tuesday August 16th to $22.90/b; during August this premium rose by 13.1%, mainly because WTI spot oil price declined by a sharper rate than Brent oil price did.
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 stockpiles slightly inclined during last week by 1.75 million barrels, while U.S. gasoline stocks may have shrunk by 5.37 million barrels to 205.8 million barrels (See here the recent petroleum report).
US PPI – July 2011
This report presents the inflation rate from producers stand point. In the previous report regarding June, this index for finished goods declined by 0.4%, after a rise of 0.2% in May; in the last month, the index declined mainly due to the drop in energy prices by 2.8%; this index will serve as an indicator for tomorrow’s US core inflation rate for July.
Euro Area CPI – July 2011
In June 2011, the annual inflation rate was 2.7%, unchanged compared with May’s for Euro Area; the inflation rate is still above the target inflation of ECB. The expectations in the upcoming CPI report for July 2011 are a slight decline. This news might affect the Euro currency, ECB’s rate decision in the upcoming month and consequentially a small effect on major commodities prices including crude oil prices.
Euro Area’s GDP 2Q2011 grew by only 0.2%
Yesterday, it was reported that the Euro Area GDP increased by only 0.2% during the second quarter of 2011; this slow paced growth is mainly because of the disappointing growth rate of 0.1% in the GDP of Germany in the second quarter 2011.
During the first quarter, the Euro Area’s GDP grew by 0.8%; Germany’s GDP inclined by 1.3%.
These figures took by surprise many analysts who expected a much higher growth rate for Germany and consequently to the Euro Area.
US Housing Market – slowdown in July
One of the prime monthly indicators on the economic progress of the US is related to the housing market. The US real estate market didn’t rise last month: the annual rate of building permits and privately owned housing starts declined during July compared with June’s figures.
S&P500 / crude oil prices – August update
The S&P500 along with other stock indexes changed direction and fell yesterday by 0.97%. The correlation between oil prices and S&P500 isn’t reliable but was strong and positive in recent months including August so far; if the S&P500 index will continue to fall today, it might further pull down crude oil prices. The chart below shows the changes in normalized prices (July 29th =100) of S&P500 index and crude oil prices during August; these prices declined during the first few days of August, but then they have changes direction and started to rise.
Current crude oil prices
Major crude oil prices are currently traded up in the U.S.market:
The Nymex crude oil price, short term futures (September 2011 delivery) is traded at $87.39 / barrel, a $0.74/b increase or 0.85%, as of 17:08*.
The Dated Brent spot oil price inclines by $1.22/b to $110.76/ barrel as of 17:19*.
Crude oil price outlook and analysis:
Crude oil prices slightly fell yesterday, but the trend was upward in recent days. There is still uncertainty in the financial markets that could spark an additional drop in stock markets that will drag down crude oil prices. The disappointing GDP growth rate of Germany and Euro Area along with the US housing market have also might have contributed to the falls in crude oil prices yesterday. These reports might curb the recent rises in crude oil prices and have them trade further down, but I still speculate that crude oil prices will trade around the $82-$87 mark for WTI spot oil and $105-$109 for Brent oil.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
10:00 – Euro Area CPI and core monthly inflation (June)
13.30 – U.S. producer price index news
15:30 – EIA report about Crude oil inventories
00.50 – Report of Japanese Trade balance
13:30 – Report on US CPI
13:30 – Department of Labor report – U.S. unemployment claims
15:00 – U.S. existing home sales
15:30 – EIA report about Natural gas storage
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.