Crude oil prices continued their downward trend during most of last week. The Brent premium over WTI slightly increased again to the $15 -$17 range. During the upcoming week there are several reports and publications that may affect the oil market including the U.S core durable goods, new and existing home sales reports and U.S jobless claims.
Here is an outlook and a weekly analysis on the crude oil market for May 21st to 25th:
Oil Prices –May
By Friday, May 18th crude oil price (WTI) declined by 1.17% and reached $91.48/b – the lowest price this year so far; Brent oil on the other hand edged up by 0.06% to $107.98/b; during last week, WTI spot oil declined by 4.84% and Brent oil by 3.63%.
In the chart below are the developments in WTI and Brent oil prices during May (prices are normalized to April 30th). It presents how both oil prices have tumbled down during most of the month (UTD).
Premium of Brent over WTI –May
The gap between Brent oil and WTI spot oil slightly increased during last week, and was in the range of $15-$17 per barrel. During May the premium increased by 11.49%.
Oil Stockpiles –Slightly Rose by 2.8Mb
U.S. crude oil stockpiles slightly increased last week by 2.8 million bl. For the week ending on May 11th oil stockpiles reached 1,769.92 million barrels.
The upcoming report will be published on Wednesday, May 23rd and will refer to the week ending on May 18th.
Main Oil Related News Items for the upcoming week
Tuesday 15:00 – U.S. Existing Home Sales: in the previous report regarding March 2012 the number of homes sold decreased: the seasonally adjusted annual rate of 4.48 million home sales – a 2.3% decline; if this trend will continue it may curb the recent rally in the USD;
Tuesday 00:50 – Japanese Trade balance: The Japanese trade balance deficit for March rose by 93.3% to reach 621.3 billion YEN (roughly $7.76 billion) deficit (seasonally adjusted figures). Japan is among the leading importing countries of commodities, including oil;
Wednesday 13:30 –Retails Sales Canada: It may affect the CAD exchange rate, which is strongly linked with commodities prices. In the previous report regarding February 2012, retails sales edged down by 0.2%;
Wednesday 15:00 – U.S. New Home Sales: in the previous monthly update (for March 2012), the sales of new homes declined to an annual rate of 328,000 – a 7.1% decrease (month over month); if the home sales will continue to fall, it may further indicate a slowdown in the U.S real estate market which may also affect the strength of the USD.
Wednesday 3:30– China flash Manufacturing PMI:; according to the HSBC Manufacturing PMI report for March 2012 the Manufacturing PMI edged up to 49.1; this index indicates the changes in China’s manufacturing sectors growth rate; if this negative growth will continue, this may also adversely affect commodities;
Thursday 09:00 – German Business Climate Survey: In the previous report for April 2012, the business climate index edged up from 109.8 in February to 109.9 in April; if this upward trend will continue, it might positively affect the Euro;
Thursday 13:30 – U.S. Jobless Claims: in the latest report the jobless claims remained unchanged at 370,000; this upcoming weekly report may affect commodities;
Thursday 13:30 – U.S Core Durable Goods: This report may indirectly show the shifts in U.S. demand for oil. As of March, new orders of manufactured durable goods fell by $8.4 billion; if this report will continue to be negative then it could adversely affect oil market;
Thursday 14:00 – ECB President Draghi Speaks;
Forex and Crude Oil Prices –May
The EURO/USD exchange rate continued its descent and declined last week by 1.05%. Furthermore, the AUD/USD also decreased by 1.74%. There are still positive and strong correlations among these cu exchange rates (EURO/USD, AUD/USD) and oil prices. If the U.S dollar will continue to appreciate against the EURO and Aussie dollar in the days to come, it may further adversely affect crude oil prices.
Oil Prices Outlook and Analysis:
The Brent premium over WTI oil slightly increased again last week but both oil rates have declined in recent weeks. The fundamentals (from both the demand and supply sides) still seem as if oil market continues to loosen up.
In the upcoming week the U.S core durable goods and new and existing home sales reports will be published. These reports will presents the shifts in U.S economy and may affect commodities prices; if these reports’ figures won’t meet the current expectations then they may adversely affect oil prices. If the U.S stock market will continue to decline this may adversely affect oil prices. Finally, if major currencies including EURO and Aussie dollar will further depreciate against the U.S. dollar, then they may also drag down crude oil prices.
I speculate during the following week, WTI oil price will trade between $88 and $94 and Brent between $104 and $111.
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