Crude oil prices continue to zigzag but still demonstrate a gradual upward trend in the past few days. The EIA oil market report was published yesterday and showed a decline in crude oil stockpile of 1.37 million bbl during last week. Crude oil prices are currently traded with moderate falls. Today, the U.S. consumer price index will be published; The US unemployment claims and US existing home sales.
Here’s a short analysis and outlook of the crude oil market for today, August 18th:
Crude oil prices –August
On Wednesday, August 17th crude oil price (WTI) changed direction and rose by 1.07% to $87.58/b; Brent oil price also slightly inclined by 0.88% to $110.65/b; during August WTI spot oil declined by 8.47%; Brent oil fell by 4.55%. During August, WTI spot oil changed directions seven times and five times in the past five business days. That being said, there is still an upward trend in recent week.
The chart below presents the normalized price development of WTI spot oil and Brent oil during August. It shows the shift from decline to rise in crude oil prices.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil slightly inclined on Wednesday August 17th to $23.07/b; during August this premium rose by 13.93%, mainly because WTI spot oil price declined by a sharper rate than Brent oil price did.
Natural gas Storage – will be published today
The natural gas storage (Billion Cubic Feet) inclined last week by 25 Bcf to 2,783 billion cubic feet for all lower 48 states – the highest stock level since January 7th, 2011; the natural gas storage is still 2.8% below the 5-year average, and 6.6% below the storage level during the same week in 2010.
U.S. unemployment claims
The weekly update on unemployment claims will be publish and serves as a good indicator of the weekly changes in the people outside the U.S. Labor market. For the week ending on August 6th, number of insured unemployment decreased by 15,000 to 3.718 million (4-week moving average). If this decrease will continue it may indicate more people found jobs or gave up looking, but in any case will decrease the rate of unemployment (see here my recent review on the US Labor market).
U.S. existing home sales
Following the decline in US housing starts and building permits as states in the recent U.S. Census Bureau report for July 2011, the report on the U.S. existing home sales might also show a slow down in July. In June, the seasonally adjusted annual rate fell by 0.8% to 4.77 million home sales. If this downward trend will continue it will be another indicator of the economic slowdown in the US.
US Petroleum stocks fell by 1.37 million bbl last week
The US Energy Information Administration published yesterday its weekly report on the U.S. petroleum market: the U.S. oil stockpiles slightly declined during last week by 1.37 million barrels and reached 1,795 million barrels.
The chart below shows the crude oil stockpiles levels compared to the WTI crude oil prices during 2010 and 2011.
US PPI – rose by 0.2% in July 2011
The producer price index for finished goods rose by 0.2%, after the PPI fell by 0.4% in June. This index serves as a good indicator of the CPI that will be published today.
S&P500 / crude oil prices – August update
The S&P500 along with other stock indexes didn’t do much yesterday and slightly inclined by 0.09%. 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 rise today, it might further push up crude oil prices.
Current crude oil prices
Major crude oil prices are currently traded down in the European market:
The Nymex crude oil price, short term futures (September 2011 delivery) is traded at $87.00 / barrel, a $0.58/b decrease or 0.66%, as of 09:10*.
The Dated Brent spot oil price declines by $0.33/b to $110.32/ barrel as of 09:21*.
Thus, the current premium of Brent over WTI is at $23.32/b.
Crude oil price outlook and analysis:
Crude oil prices continue to shift direction, but they are still on a path to regain some of the losses they have recorded from the beginning of the month. If the US housing report on home sales won’t be good it might contribute to the fall of crude oil prices. I still think that oil prices fell too sharply too soon and will make a gradual correction in the days to come as WTI oil price may reach $85-$90 mark and Brent oil $108-$112 mark.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
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
13.00 – Canadian Core CPI
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.