Crude oil prices changed direction and sharply fell during most of last week. This recent decline might shift back to gains if the recent news from the Middle East including the sanctions posed by U.S. on Iran will affect the oil exports and productions.
Here’s an outlook and analysis of the crude oil market for the week of November 21st to November 25th:
Crude Oil Prices – November Update
On Friday, November 18th crude oil price (WTI) declined by 1.43% to $97.41/b – the lowest price level for last week; Brent oil price on the other hand slightly rose by 0.05% to $107.91/b; during November WTI spot oil increased by 4.53% and Brent oil price by 1.47%.
The chart below presents the development of WTI spot oil and Brent oil prices during November (prices are normalized to October 31st).
Premium of Brent over WTI – November Update
The premium of Brent oil over WTI spot oil sharply declined throughout the week and reached on Friday to $10.50. During November the premium fell by 35.70%.
Due to the sharp fall in the difference between Brent oil and WTI oil prices, the correlation between the daily percent changes of Brent oil and WTI also sharply declined during November.
Crude oil Stockpiles – Declined Last Week
U.S. Petroleum and crude oil stockpiles fell last week by 8.7 million to 1,736.65 million barrels. The current oil stockpiles are 96,303 million barrels below oil stockpiles levels recorded during the same week in 2010.
If the crude oil stockpiles will decrease again it may further pressure the WTI oil price to rise.
The new report will be published on Wednesday, November 23rd.
The chart below shows the petroleum and oil stockpiles levels compared to the WTI crude oil price in 2010 and 2011.
Forex Exchange Rates Market and Oil Prices – November
The EURO/USD exchange rate declined during last week by 0.80%; this trend continues the downward trend of the Euro against the USD along with other forex exchange rates including the AUD/USD and USD/CAD. If the U.S dollar will continue to appreciate against the Euro, this may also affect crude oil prices to further decline.
U.S. Stock Market / Crude Oil Prices – November
The S&P500 index declined during last week by 2.89% to reach 1,215 on Friday; during recent months there was a strong positive correlation between crude oil prices and S&P500 index (e.g. during November the correlation with WTI oil price was 0.499 and with Brent oil 0.757).
If the American stock markets will continue to decline as they did during last week, it may also contribute to the falls of crude oil prices.
Current Crude Oil Prices (November 21st)
Major crude oil prices are currently traded down in the European market:
Nymex crude oil price, short term futures (December 2011 delivery) is traded at $96.17/ barrel, a $1.50/b decrease or 1.54%, as of 12:10*.
Brent oil price declines by $1.19/b to $106.73/ barrel as of 12:20*.
Thus, the current premium of Brent over WTI is at $10.56/b.
Crude Oil Prices Forecast and Analysis:
Crude oil prices shifted direction from the sharp gains they have experienced at the first couple of weeks of November and sharply declined during last week. The American stock markets continue to strongly affect the movement of WTI oil price. The recent developments in the Middle East might rekindle the fear of disruption in oil production that could pressure crude oil prices to rise again. On the other hand, the rapid political changes in Europe over the debt crisis and the talks in the U.S. over budget cuts during the upcoming week may further reduce crude oil prices. The forex market will likely to continue playing a role in the development of crude oil prices.
I speculate that during the upcoming week, WTI oil price will revolve around $93-$99 mark and Brent oil price around $103-$109.
For further reading:
- Crude Oil Prices– Weekly Recap 14-18 November
- Weekly Outlook for 21-25 November
- Natural Gas Prices Outlook – November 21-25
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.