Crude oil prices started July with moderate falls, and they are currently traded up . The IEA-OPEC feud was the main talk of the day and there are still speculations around it; today, the US Manufacturing Shipments and Orders report will be published along with the Australian rate decision.
Here’s a short analysis and outlook of the crude oil market for today, July 5th:
Crude oil prices – July 2011
On Friday, July 1st crude oil price (WTI) moderately declined by 0.5% to $94.94/b; during June-July WTI spot oil shed nearly 7.6% of its value.
Brent oil price, also declined by 0.26% to $111.38/b; during June-July Brent oil declined by 4.9%.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil started off July with a moderate rise as it reached on Friday July 1st $16.44/b; this gap rose by 21.75% during June.
Following the spike in the premium of Brent oil over WTI on June 13th in which it reached $23.29/b, this premium declined; it is still fluctuating, but in recent days it settled around the $16-$17 mark.
OPEC and IEA – update
Following the announcement of IEA in which it will release 60 million barrels of crude oil from its emergency reserves, there was news of a feud between OPEC and IEA; OPEC criticized IEA for making this move as the reserves are suppose to be used for emergency and the current situation in the crude oil market doesn’t constitute an emergency. There were even those who speculated that this move by the IEA will cause OPEC countries including Saudi Arabia to reduce their crude oil production.
In the recent OPEC-IEA meeting in Vienna, Austria on June 27th, the two organizations stated they will bury the hatchet and this oil release won’t affect OPEC’s oil production and it will continue to fill the gap of Libya’s oil production.
In recent news, Saudi Arabia ordered additional rigs to keep its crude oil production which is set to nine million bbl/d. This might indicate that Saudi Arabia will maintain a high crude oil production, but it’s still too early to determine if the total oil production of OPEC won’t decline due to the recent oil release of IEA.
US Manufacturing Shipments and Orders
Today, the US Department of Commerce will issue its monthly report of Manufacturing Shipments and Orders regarding May 2011; this report could serve as a good signal for the changes in the investment and production in the US; in the advance report of May 2011, the new orders manufacturing goods rose by $3.6 billion or 1.9% to $195.6 billion. The shipments of manufactured durable goods inclined in May by 0.3% to $194.6 billion. If the upcoming report will continue to show an improvement, this might signal the US economy’s recovery from its slowdown.
News related to Oil and Gas Market
- China’s oil spill on the eastern coast will have a long term effect;
- Russia’s gas production declined from 1.86 bcm/d during May to 1.689 billion cubic meters per day during June;
- Oil production in Kansas increased, while the natural gas production fell;
- Argentina seeks big payoff from its recent discovery of shale oil field, which is estimated at 150 million barrels;
Brazil also announced it found two oil and gas discoveries off the coast of Espirito Santo state;
Current crude oil prices
Major crude oil prices are currently traded up at the European markets:
The Nymex crude oil price, short term futures (August 2011 delivery) is traded at $95.99 / barrel, a $1.05/b increase or 1.11%, as of 13:53*.
The Dated Brent spot oil price inclines by $1.62/b to $112.86 / barrel as of 14:05*.
Thus, the current premium of Brent over WTI is at $16.87/b.
Crude oil price outlook and analysis:
There will continue to be speculations around OPEC’s crude oil production following the release of the oil reserves by the IEA. The US dollar will continue to affect the crude oil prices and if USD will start to appreciate against major currencies this could cause crude oil prices to trade down. These two opposing direction are likely to pull crude oil prices in different directions.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
5:30 – Reserve Bank of Australia – rate decisions
15:00 – U.S. Department of Commerce – US Manufacturing Shipments and Orders
10:00 – Final GDP of Q1 of European Union
11:00 – German Factory Orders
15:00 – ISM Non-Manufacturing PMI
2:30 – Australian employment report
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