Crude oil prices changed direction again and bounced back from the falls they had recorded on Monday. The rally in the American and European stock markets may have contributed to this rally. Currently crude oil prices are traded with moderate changes. Today, U.S. Consumer Price Index will be published; the U.S. building permits and housing starts, and the EIA crude oil stockpiles report.
Here’s an outlook and analysis of the crude oil market for today, October 19th:
Crude Oil Prices – October Update
On Monday, October 18th crude oil price (WTI) sharply inclined by 2.27% to $88.34/b; Brent oil price slightly increase by 0.90% to $112.68/b; during October WTI spot oil rose by 7.90% and Brent oil price by 6.89%.
The chart below presents the prices development of WTI spot oil and Brent oil 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 Tuesday to $24.34. During October the premium inclined by 3.35%.
U.S PPI Sharply Inclined in September
The U.S producer price index sharp increase in September by 0.8%; the energy index is one of the prime factors that rose in September by 2.3%, the Producer Price index excluding food and energy slightly increased by 0.2%. This index serves as a good indictor for the upcoming U.S CPI to be published today.
On Today’s Agenda:
Crude Oil Stockpiles Report: the Energy Information Administration will publish its weekly report on the U.S Petroleum market for last week. The current estimates are that the crude oil stockpiles dropped by 1.6 million barrels according to Bloomberg; in the previous report, the U.S petroleum & oil stockpiles declined by 1.4 million barrels to 1,769.1 million barrels (see here the recent oil stockpiles review);
U.S CPI: This monthly report will show the main changes in the consumer price index during September. According to the US Bureau of Labor statistics for August 2011, the CPI inclined by 0.4% and over the last 12 months by 3.8%. The core CPI inclined in August by 0.2%;
U.S. Building Permits & Housing Starts Report: The recent report showed an improvement in the building permits during August 2011, while the adjusted annual rate for housing starts fell during the month (see here the recent review);
Forex Market and Crude Oil Prices – October
The AUD/USD exchange rate inclined on Tuesday by 1.03%. Furthermore, the USD also slightly depreciated against the Euro and CAD. The speculation around the European crisis continues to influence forex and commodities traders. If the U.S dollar will depreciate against the risk currencies (AUD, CAD) as it in most of October, this may also affect crude oil prices to increase.
U.S. Stock Market / Crude Oil Prices – October
The S&P500 index sharply inclined on Tuesday by 2.04% to 1,225.38. During recent months there was a strong positive correlation between crude oil prices and S&P500 index (e.g. for WTI it was 0.583 and for Brent oil it was 0.579 in October (UTD), as seen in the chart below.
The recent rally of the American stock markets in recent weeks seems to have contributed to the rally of 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 (November 2011 delivery) is traded at $88.58/ barrel, a $0.24 /b increase or 0.27%, as of 11:42*.
The Dated Brent spot oil price declines by $0.33/b to $112.35/ barrel as of 11:53*.
Thus, the current premium of Brent over WTI is at $23.77/b.
Crude Oil Prices Outlook and Analysis:
According to a recent report by Goldman Sachs, their analysts project an improvement in Europe’s economic outlook along with a drop in crude oil stockpiles may push Brent oil prices back up. The upcoming U.S. CPI and crude oil stockpiles may affect WTI crude oil price during the day. But more than other fundamental factors the effect of the stock market seems to be among the main factors affecting crude oil prices. The speculation revolving the next step of the Euro leaders in resolving the debt crisis will continue to influence the financial markets including crude oil market. I still speculate that during the week WTI oil price will settle 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):
13:30 – Report of U.S CPI
13:30 – U.S. Building Permits
13:30 – U.S. Housing Starts
15:30 – EIA Report on Crude Oil Stockpiles
For further reading:
- Weekly Outlook for October 17-21
- Crude Oil Prices – Weekly Recap 10-14 October
- Natural gas prices outlook for October 2011
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.