Crude oil prices changed direction and bounced back over the weak US dollar that fell probably due to the news of Moody’s concerns over US debt and Bernanke’s speech; according to recent US EIA report US petroleum stocks rose by 4.314 million barrels to decline as the Euro keeps on freefalling. Today, the US producer price index will be published along the US unemployment claims. EIA will publish its weekly review of the natural gas market.
Here’s a short analysis and outlook of the crude oil market for today, July 14th:
Crude oil prices – July 2011
On Wednesday, July 13th crude oil price (WTI) rose very moderately by 0.66% to $98.05/b; during July WTI spot oil inclined by 2.89%.
Brent oil price also rose by 0.20% to $117.60/b; during July Brent oil rose by 5.27%.
The chart below shows the changes of WTI spot oil and Brent oil price during July, in which they are both normalized to 100=30 of June.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil continue to remain high as it reached on Wednesday July 13th $19.55/b; this gap rose by 19.13% during July, mainly because Brent oil price rose while WTI spot oil price nearly didn’t change.
US Petroleum stocks rose last week
The US Energy Information Administration published yesterday its weekly report on U.S. petroleum and crude oil market: the U.S. Petroleum and oil stocks inclined again last week by 4.314 million barrels, or by 0.24% – the highest injection since May 27th. For the week ending on July 8th crude oil stocks reached 1,796 million barrels – the highest stockpiles since February 4th, 2011 (See here the recent petroleum report).
China’s growth in GDP
Despite the restrictions taken by PBC to contain the progress of the Chinese inflation and consequently the Chinese economy, China’s GDP grew during the second quarter by 2.2% (Q-2-Q) and 9.6% in annual terms. China is the second largest consumer of crude oil and the biggest importer of crude oil.
Ben’s Testimony and Moody’s US rating
Yesterday two news items may have contributed to the weak US dollar and caused the major commodities prices to rise:
The first news item includes Ben Bernanke testified yesterday before the US senate. He referred to the future steps that the Fed might consider including:
“… given the range of uncertainties about the strength of the recovery and prospects for inflation over the medium term, the Federal Reserve remains prepared to respond should economic developments indicate that an adjustment in the stance of monetary policy would be appropriate.. … to initiate more securities purchases or to increase the average maturity of our holdings. “ (see here the entire testimony)
This keeps the door open for an additional action by the Federal Reserve including stimulus plans (quantitative easing 3).
The second items refer to Moody’s as it voiced its concerns over the current political situation in the U.S. over raising the debt ceiling by the beginning of August. The US may loose its AAA rating raking: if the U.S. debt limit won’t be revised; this might lead to a default of the US Treasury debt obligations.
Euro to US dollar and crude oil prices – July update
During yesterday the Euro to US dollar exchange rate rose very sharply by 1.37% probably over the news about Moody’s rating and Bernanke’s speech. During June, the EURO/USD exchange rate was highly correlated with the daily percent changes of crude oil prices. This might suggest that the EURO/USD rise might have coincided with the recent added value to crude oil prices.
Current crude oil prices
Major crude oil prices are currently traded down in the US markets:
The Nymex crude oil price, short term futures (August 2011 delivery) is traded at $98.16 / barrel, a $0.11/b increase or 0.11%, as of 13:40*.
The Dated Brent spot oil price inclines by $0.04/b to $117.63/ barrel as of 13:51*.
(* GMT)
Thus, the current premium of Brent over WTI is at $19.47/b.
Crude oil price outlook and analysis:
Crude oil prices continue to zigzag, but they did rose during July so far; they might continue to moderately incline throughout the rest of the week over the weak US dollar and weak Euro. There are still fundamental factors to keep crude oil prices high including the expected growth in demand, and the uncertainty over the supply.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
Today
13.30 – U.S. producer price index news
13:30 – Department of Labor report – U.S. unemployment claims
15:30 – EIA report about Natural gas storage
Tomorrow
13.30 – Report on US CPI
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