Crude oil prices finished the week with moderate changes on Black Friday. There are several reports that will be published during the upcoming week and could affect not only the stock and forex markets, but also energy prices including crude oil price. The reports include U.S. new home sales report, U.S. consumer Confidence report and U.S. PMI Manufacturing. The oil stockpiles continued to decline during last week and might continue this downward trend in the upcoming report.
Here’s an outlook and analysis of the crude oil market for the week of November 28th to December 2nd:
Crude Oil Prices – November Update
On Friday, November 25th crude oil price (WTI) slightly rose by 0.94% to $96.77/b; Brent oil price on the other hand slightly fell by 0.43% to $106.77/b; during November WTI spot oil increased by 3.84% and Brent oil price declined by 2.51%.
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 declined during last week and reached on Friday to $10.00. During November the premium fell by 38.76%.
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 – Slipped Last Week
U.S. Petroleum and crude oil stockpiles declined last week by 3.8 million barrels for the week ending on November 18th to 1,732.75 million barrels. The current oil stockpiles are still well below the quota during the same week last year. If the crude oil stockpiles will decline again in the upcoming report, this may curb the decline of WTI oil price.
The new report will be published on Wednesday, November 30th.
The chart below presents 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 fell during last week by 1.86%; this trend continues the depreciation of the Euro against the USD along with other forex exchange rates including the Australian dollar and British Pound. If the U.S dollar will continue to appreciate against the Euro, this may also affect crude oil to trade down.
U.S. Stock Market / Crude Oil Prices – November
The S&P500 index fell during last week by 2.88% to reach 1,158 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 0.562 and with Brent oil 0.681).
If the American stock markets will continue to fall as they did during last week, this downward trend may also pressure down crude oil prices.
Current Crude Oil Prices (November 28th)
Major crude oil prices are currently traded sharply up in the European market:
Nymex crude oil price, short term futures (December 2011 delivery) is traded at $99.70/ barrel, a $2.93/b increase or 3.03%, as of 09:20*.
Brent oil price inclines by $2.49/b to $109.26/ barrel as of 09:32*.
Thus, the current premium of Brent over WTI is at $9.56/b.
Crude Oil Prices Forecast and Analysis:
Crude oil prices didn’t do much during last week, much like many other commodities prices. But this price stagnation might be broken depending on the ongoing news from the U.S. in regards to the budget cuts and the market sentiment in regards to the European debt crisis. The American stock markets are still strongly correlated to WTI oil price. If the news from Europe and U.S will adversely affect the stock markets, the oil prices may also decline. The forex market will likely to continue affecting the development of crude oil prices as presented above.
I speculate that during the upcoming week, WTI oil price will revolve around $96-$103 mark and Brent oil price around $105-$112.
For further reading:
- Crude Oil Prices– Weekly Recap 21-25 November
- Weekly Outlook for 28 November – 2 December
- Gold and Silver Prices Weekly Outlook for Nov 28 – Dec 2
- Natural Gas Prices Outlook – November 28- December 2