Crude oil prices inclined for the second straight day (third for Brent oil) after they had fell during most of last week. The shift might be related, in part, to the recent rise in the stock market, including the S&P500. It might also a correction to the recent falls in oil prices that seem to have been too sharp too fast. Crude oil prices are currently traded with moderate changes. Today, the U.S. retails sales report will be published. The American trade deficit inclined in June. The EIA natural gas report showed an increase in natural gas storage.
Here’s a short analysis and outlook of the crude oil market for today, August 12th:
Crude oil prices –August
On Thursday, August 11th crude oil price (WTI) rose by 3.41% to $85.72/b; Brent oil price also rose by 2.22% to $107.70/b; during August WTI spot oil declined by 10.4%; Brent oil fell by 7.1%.
The chart below presents the normalized prices of WTI spot oil and Brent oil during August (July 29th=100).
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil declined again yesterday August 11th to $21.98/b; during August this premium rose by 8.54%, mainly because WTI spot oil price declined at a sharper rate than Brent oil price did. This finding suggests that the crude oil market in Europe is still tighter than in the US.
Natural gas Storage rose by 25Bcf
The natural gas storage (Billion Cubic Feet) inclined last week by 25 Bcf to 2,783 billion cubic feet for all lower 48 states – the highest stock level since January 7th, 2011; the natural gas storage is still 2.8% below the 5-year average.
To sum up, natural gas storage and production inclined while natural gas prices, imports and consumption fell during the week of August 5th.
This finding suggests that the natural gas market is cooling down even though it benefited from the high oil prices and the recent heat wave in the US to keep its prices high.
Changes in US retail sales
This report will present the monthly changes in the retail sales and food services; in the precious report regarding June, the retail sales, when controlling for the price changes, slightly inclined by 0.1% from the previous month; retail sales were up 0.2% from May 2011; gasoline stations sales were slightly down by 1.2% in June compared to May 2011, but were 23.6% above sales in June 2010. This could serve as another indicator to the economic progress of the US.
American trade balance – the deficit inclined in June
The American trade balance report didn’t show an improvement in the American economy during June. During that month, the goods and services deficit increased by $2.3 billion compared to May 2011 and reached $53.1 billion; the goods deficit increased by $2.1 billion compared to May 2011 and reached $67.6 billion; the service surplus fell only $0.1 billion to $14.5 billion; these figures demonstrate the economic slowdown in the US.
S&P500 / crude oil prices – August update
The S&P500 along with other stock indexes bounced back yesterday if the stock market will resume its downward trend it may further pull down major energy commodities prices including crude oil prices. The correlation between oil prices and S&P500 isn’t reliable but in August so far it was strong; the chart below shows the price development of the S&P500 index with 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 (September 2011 delivery) is traded at $85.69 / barrel, a $3.17/b decrease or 0.04%, as of 12:26*.
The Dated Brent spot oil price inclines by $0.2/b to $107.9/ barrel as of 12:37*.
Thus, the current premium of Brent over WTI is at $22.21/b.
Crude oil price outlook and analysis:
Crude oil prices have declined very sharply during most of August, but gained back some of the losses in recent days. There is still uncertainty in the financial markets that could spark an additional drop in stock markets that will affect crude oil prices to trade down as well. I speculate that crude oil prices will settle around the $80-$85 mark for WTI spot oil and $103-$107 for Brent oil.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
15:30 – Changes in US retail sales
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.