Crude oil prices continued to fall yesterday, but will this trend continue? Today, the U.S. non-manufacturing PMI report will be published, and the EIA petroleum report. Here’s a short analysis and outlook of the crude oil market for today, August 3rd:
Crude oil prices –August
On Tuesday, August 2nd crude oil price (WTI) declined by 1.16% to $93.79/b; this is the third straight business day in which crude oil prices were traded down.
Brent oil price also fell by 0.80% to $115.32/b; during August Brent oil declined by 1.28%.
The chart below presents the prices of WTI spot oil and Brent oil during June to August. It shows the fall of crude oil prices mainly during June, the upward trend during the first week of July and stability of crude oil prices since then with a moderate downward trend.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil continues to slowly rise as it inclined on Tuesday August 3rd to $21.53/b; during August this premium rose by 1.99%, mainly because Brent oil price has outperformed WTI spot oil price.
Petroleum stocks in the US
The US Energy Information Administration will publish its weekly report on U.S. petroleum stocks: according to Bloomberg the U.S. crude oil stocks declined last week by 3.31 million barrels. For the week ending on July 22nd crude oil stocks reached 1,809 million barrels an increase of 9.1 million barrels compared to the previous week (See here the previous petroleum report).
US debt ceiling
The House of Representatives voted to raise the US debt ceiling. The financial markets reacted as the US dollar appreciated against major currencies (see below) and crude oil prices traded down. But this effect will likely to end very soon as the US economy is still not performing well and its debt will continue to rise.
US dollar / Crude oil prices – August update
On Tuesday, Euro to US dollar exchange rate declined by 0.31%; the US dollar to Canadian dollar inclined by 0.44%; the Australian dollar to US dollar fell by 1.75%; this means that US dollar continued to appreciate against major currencies. The U.S. debt ceiling news might have affected traders to trade up US dollar, but this news is likely to have a short term effect on US dollar. There are also growing concerns about rating agencies downgrading the credit rating of the US.
Finally, consider that the correlation of major exchange rate such as US dollar to Canadian dollar had a weaker correlation during July compared with June’s correlation.
US ISM non-Manufacturing PMI
This report presents the changes of non-manufacturing sector during July 2011. During June this index continued to show growth of 53.3%, but it was a lower rate than the 54.6% rate it reached in May. This news usually has little effect on crude oil prices, but it might affect the US dollar and thus indirectly affect crude oil prices.
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 (September 2011 delivery) is traded at $93.31 / barrel, a $0.48/b decrease or 0.51%, as of 11:56*.
The Dated Brent spot oil price inclines by $0.13/b to $115.45/ barrel as of 12:07*.
Thus, the current premium of Brent over WTI is at $22.14/b.
Crude oil price outlook and analysis:
Crude oil prices declined during the past several days as the concerns over the economic progress of the US are still high; on the other hand, the seasonal effect might continue keeping crude oil prices high, especially as there are speculations that OPEC mainly Saudi Arabia) raised its output during July; OPEC monthly report will reveal this matter (to be published next week); in the short term, crude oil price are likely to remain near $97-$100 for WTI spot oil and $116-$118 for Brent oil, but they might start to slowly pick up again during the week.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
15.00 – U.S. ISM Non-Manufacturing PMI
15:30 – EIA report about Crude oil inventories
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
Tentative – Bank of Japan – rate decision and monetary policy statement [ratings]
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.