WTI oil price slightly inclined during most of last week which coincided with the sharp rally in the U.S stock markets. Currently crude oil prices are traded slightly up. Today, Trichet will speak in an ECB Press Conference; the Euro Area Manufacturing PMI will be published.
Here’s an outlook and analysis of the crude oil market for today, October 24th:
Crude Oil Prices – October Update
On Friday, October 21st crude oil price (WTI) sharply increased by 2.25% to $87.22/b; Brent oil price on the other hand slightly slipped by 0.08% to $110.78/b; during October WTI spot oil rose by 6.53% and Brent oil price by 5.08%.
The chart below shows the development of WTI spot oil and Brent oil prices during October (normalized prices Sept 30=100).
Premium of Brent over WTI – October Update
The premium of Brent oil over WTI spot oil fell on Friday to $23.56. During October the premium nearly didn’t change.
Hedge Funds Bullish on Commodities & U.S GDP
According to a report, Hedge funds are renewing their bullish bets in raw materials over the expectations that the U.S. economy is coming out of its slowdown.
The U.S. GDP report for the 3Q 2011 will be published on Thursday; some expect that the growth rate will be 2.5%. If this figure will turn out to be true, it could ease some of the uncertainty and thus may push up crude oil prices.
On Today’s Agenda:
Euro Area Manufacturing PMI: In the last report regarding August, the Euro Zone Manufacturing PMI reached 48.4. This report will provide an indicator to the economic growth of the Euro zone economy and could affect commodities prices;
ECB Press Conference Trichet Speaks: Jean Claude Trichet, President of the European Central Bank, will probably refer to the recent EU Summit which was held yesterday (see below). This speech may affect the Euros to US dollar exchange rate;
Forex Market and Crude Oil Prices – October
The AUD/USD exchange rate sharply inclined on Friday by 1.41%. Furthermore, the USD also depreciated against the Euro and CAD. The speculation around the European debt crisis and debacle in the recent EU summit continues to affect forex and commodities traders. If the U.S dollar will further depreciate against the risk currencies (AUD, CAD) as it did during the month, this may also affect crude oil prices to rise.
U.S. Stock Market / Crude Oil Prices – October
The S&P500 index sharply inclined on Friday by 1.88% to 1,238.25. Thus completing a rally of 9.44% during October (UTD); during recent months there was a strong positive correlation between crude oil prices and S&P500 index (e.g. during October the correlation with WTI oil price was 0.631 and with Brent oil 0.593).
If the American stock markets will continue their progress as they did in recent weeks, it may also contribute to the gains in crude oil prices.
Current Crude Oil Prices
Major crude oil prices are currently traded slightly up in the European market:
The Nymex crude oil price, short term futures (November 2011 delivery) is traded at $87.77/ barrel, a $0.37 /b increase or 0.42%, as of 10:33*.
The Dated Brent spot oil price inclines by $0.46/b to $111.24/ barrel as of 10:43*.
Thus, the current premium of Brent over WTI is at $23.47/b.
Crude Oil Prices Forecast and Analysis:
The speculation revolving the next step of the Euro policymakers regarding the debt crisis will continue to affect the financial markets including crude oil market. On the other hand, the cautious optimism in the American market regarding the progress of the American economy helped push up not only the U.S. stock markets but also the crude oil prices. This cautious optimism could keep crude oil prices high in the near future. Therefore I speculate that during the week WTI oil price will revolve around $85-$92 mark and Brent oil price around $108-$115.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
09:00 – Euro Area Manufacturing PMI
23:00 – ECB Press Conference Trichet Speaks
For further reading:
- Weekly Outlook for October 24-28
- Crude Oil Prices – Weekly Recap 17-21 October
- Natural gas prices outlook for October 2011
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.