Crude oil prices started the week with sharp rises that continues the upward trend in recent days. The shift might be related, in part, to the recent rise in the stock market, including the S&P500. Crude oil prices are currently traded with moderate falls. Today, the U.S. Building permits and Housing starts reports will be published and the European Union GDP second quarter report.
Here’s a short analysis and outlook of the crude oil market for today, August 16th:
Crude oil prices –August
On Monday, August 15th crude oil price (WTI) sharply rose by 2.93% to $87.88/b; Brent oil price also inclined by 2.26% to $109.77/b; during August WTI spot oil declined by 8.15%; Brent oil fell by 5.31%.
The chart below presents the normalized price developments of WTI spot oil and Brent oil (July 29th =100) during August.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil nearly didn’t change on Monday August 15th as it settled at $21.89/b; during August this premium rose by 8.10%, mainly because WTI spot oil price declined by a sharper rate than Brent oil price did.
Germany’s economy grew by only 0.1% during the second quarter of 2011. The Euro Area economy rose by only 0.2% in the Q2 2011. This news doesn’t look well for the Euro Area GDP growth rate, with such similar disappointing figures. This news is likely to depreciate the Euro against the US dollar. The slowdown in the progress of the Euro Area economy might also curb some of the recent rises in crude oil prices.
US Housing Market – July update
Today the building permits rate and housing starts report will be published. These reports will provide some indication of the economic progress of the US housing market. In the last report the adjusted annual rate of housing starts reached 629,000 in June 2011, which is 14.6% above the May rate of 549,000.
S&P500 / crude oil prices – August update
The S&P500 along with other stock indexes continue to gain back some of the losses recorded during the beginning of last week. The correlation between oil prices and S&P500 isn’t reliable but was strong and positive in recent months including August so far; if the S&P500 index will continue to rise, it might further pull up crude oil prices.
Current crude oil prices
Major crude oil prices are currently traded down in the European market:
The Nymex crude oil price, short term futures (September 2011 delivery) is traded at $86.71 / barrel, a $1.17/b decrease or 1.33%, as of 09:47*.
The Dated Brent spot oil price declines by $1.47/b to $108.30/ barrel as of 09:59*.
Thus, the current premium of Brent over WTI is at $21.59/b.
Crude oil price outlook and analysis:
Crude oil prices changed direction and gain back some of the losses from the beginning of August. There is still uncertainty in the financial markets that could spark an additional drop in stock markets that will drag down crude oil prices. The recent disappointing GDP growth rate of Germany might spark an additional round of falls in stock markets. On the other hand, the US economy might continue to show progress with the building permits and housing starts that will pull up oil prices. These opposite forces are likely to keep oil prices changing with no clear direction. I speculate that crude oil prices will trade around the $82-$87 mark for WTI spot oil and $105-$109 for Brent oil.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
10:00– Main Europe’s economy’s GDP 2Q2011 report
13.30 – U.S. Building Permits
13.30 – U.S. Housing Starts
10:00 – Euro Area CPI and core monthly inflation (June)
13.30 – U.S. producer price index news
15:30 – EIA report about Crude oil inventories
00.50 – Report of Japanese Trade balance
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Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.