Crude oil prices curbed their rally during last week after they had sharply inclined during October. Currently crude oil prices are traded slightly up. Today, the German Industrial Production will be published, and the Australian Trade balance report.
Here’s an outlook and analysis of the crude oil market for today November 7th:
Crude Oil Prices – November Update
On Friday, November 4th crude oil price (WTI) slightly rose by 0.20% to $94.26/b; Brent oil price also inclined by 1.38% to $112.55/b; during November WTI spot oil rose by 1.15% and Brent oil price by 2.77%.
The chart below shows the development of WTI spot oil and Brent oil prices during October and November (prices are normalized to September 30th).
Premium of Brent over WTI – October Update
The premium of Brent oil over WTI spot oil sharply rose on Friday to $18.29 – the highest premium level during last week. During November the premium rose by 12%.
Crude oil Stockpiles – Rose Last Week
U.S. Petroleum and crude oil stockpiles inclined last week by 1.8 million barrels, to 1,760.7 million barrels. The current oil stockpiles are still well below the quota recoded in 2010: the current crude oil stockpiles are 93,178 million barrels below oil stockpiles levels recorded during the same week in 2010.
U.S. Employment Grew by 80k
In the recent U.S. labor report, the employment grew by 80k; this is the second consecutive positive month for the U.S. labor to grow. This news may also be among the reasons for the light gains in crude oil prices on Friday.
On Today’s Agenda:
German Industrial Production: this report will show the changes in the Germany industrial production and could indicate the progress of the German Economy and consequently may affect commodities traders;
Australian Trade Balance: In the August report, the seasonally adjusted balance of goods and services sharply rose from a surplus of $1,817 million in July 2011 to $3,100 million in August 2011 (see here last report);
Forex Exchange Rates Market and Oil Prices – November
The EURO/USD exchange rate slipped on Friday by 0.22%, after it had risen on Wednesday and Thursday. Furthermore, the USD also appreciated against other forex exchange rates including the AUD and CAD. If the U.S dollar will further appreciate against the risk currencies (AUD, CAD) this may also affect crude oil prices to drop.
U.S. Stock Market / Crude Oil Prices – November
The S&P500 index slightly declined on Friday by 0.63% to 1,253; during recent months there was a strong positive correlation between crude oil prices and S&P500 index (e.g. during October-November the correlation with WTI oil price was 0.531 and with Brent oil 0.480).
If the American stock markets will rally as they did October, it may also contribute to the rises in crude oil prices (especially WTI oil price).
Current Crude Oil Prices
Major crude oil prices are currently traded slightly up in the European market:
Nymex crude oil price, short term futures (December 2011 delivery) is traded at $94.59/ barrel, a $0.33 /b increase or 0.35%, as of 12:12*.
Brent oil price inclines by $0.47/b to $113.02/ barrel as of 12:23*.
Thus, the current premium of Brent over WTI is at $18.43/b.
Crude Oil Prices Forecast and Analysis:
The rally of crude oil prices in October started to cool down in recent weeks; the rally of crude oil prices coincides with the sharp gains of the U.S. stock markets. The recent good news of the U.S. economy (labor report) may help push crude oil prices further up. On the other hand there are reports of hedge funds reducing their bets on commodities; this shift may curb the recent rally and perhaps even reverse the gains in crude oil prices to losses. The decline in the premium of Brent oil over WTI oil has reached a halt last week, but may continue to decline if the WTI will keep rising by a larger rate than Brent oil price.
I speculate that during the week, WTI oil price will revolve around $92-$98 mark and Brent oil price around $109-$116.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
12:00 – German Industrial Production
2:30 – Australian Trade Balance
For further reading:
- Weekly Outlook for 7-11 November
- Crude Oil Prices – Weekly Recap 31Oct- 4 Nov
- Gold & Silver Prices – Daily Outlook November 7
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.