Crude oil prices continue to fluctuate at a very moderate rate compared to the first week of May in which they fell very precipitately; oil prices are currently traded with moderate rises but as the day will progress you may see shifts in direction.
Let’s examine the recent news related to the crude oil market for today, May 18th:
Crude oil prices – May
Yesterday the WTI crude oil prices declined by 0.47%; During May, up to yesterday May 17th, WTI spot oil decreased by 14.5%;
Brent oil price on the other hand, didn’t change much and finished the day with a very moderate rise of 0.05%; during May Brent oil declined by 14.5%.
The standard deviations of Brent oil and WTI spot oil daily percent changes on a monthly scale show that during May were very high compared to previous months.
That being said, the chart below shows that crude oil prices started off May with very sharp falls and afterwards, except for one outlier on May 10th, crude oil prices ranged within four dollars per bbl. This shows that the high standard deviation is attributed to the rapid falls at the first dew days of the month.
The premium of Brent oil over WTI: this gap reached on Tuesday 13.94$. During May, the premium also didn’t change fluctuate much and except for May 6th, the ranged between 12 and 14.5$.
The EURO/US dollar and crude oil during May
During May, there is still a very high linear correlation between the daily changes of crude oil prices and EURO/USD.
The chart below shows the strong correlation during May of EURO//USD with WTI spot oil and Brent oil.
The uncertainty in the financial markets related to the directions of the US and European economies and consequentially their currencies and speculations around their future demand for energy are reflected in the major commodities prices including crude oil prices.
Petroleum stocks in the US
The US Energy Information Administration will publish today its weekly report on petroleum stocks: Bloomberg reports that the current estimates show that US crude oil stocks increased by 2.67 million barrels during recent week. In the previous report, U.S. petroleum stocks kept on rising and inclined by 6.5 million barrels, a 0.36% increase compared to the previous week. For the week ending on May 6th the oil stocks reached 1,774.0 million barrels – the highest level since February 25th, 2011 (See here the previous petroleum report).
JP Morgan – gold and oil will bounce back
According to recent post in Bloomberg, Ray Eyles, CEO of JP Morgan’s commodities business in Asia, thinks that major commodities including gold and crude oil will make a comeback in the long run mainly because of the rising demands in Asia including China that will drive prices up.
World news – oil markets
US approved BHP plan to explore oil in Gulf of Mexico – According to Reuters the US has recently approved BHP Billiton’s plan to deepwater exploration in the Gulf of Mexico. But it’s still early until BHP will receive an actual permit to drill.
Mississippi Flooding – Bloomberg reported that the Mississippi river water poured via 11 gates of Louisiana’s Morganza floodway and thus reduced the threat the flooding had over the second-largest oil refinery in the U.S.
Middle East, Canada and Japan
Current crude oil prices
Major crude oil prices started off the business day with rises in the European markets:
The Nymex crude oil price, short term futures (June 2011 delivery) is traded at 98.45 USD / barrel, a rise of 1.54 USD/b or 1.59%, as of 09.06*.
The Dated Brent spot oil price inclines by 0.66$/b and it is at 111.51 USD / barrel as of 09.17*.
Thus, the current premium of Brent over WTI is at 13.06$/b.
Crude Oil price outlook and analysis:
Crude oil prices continue to demonstrate moderate changes after the rapid falls at the beginning of the week.
It seems that oil traders are waiting to see what will become of Europe and US as if the news related to these economies is waiting to erupt any day now.
The uncertainty related to the European economy and the demand for oil is stem from the debt crisis in Greece, Ireland and Portugal; and from the US side, the future steps that the Fed to consider as the Quantitative easing plan will end in June.
Japan and China – among the leading countries in importing crude oil – are likely to affect the world demand in the near future as well. Japan is likely to raise its import of oil, but China might slow down its growth rate.
All these factors pull crude oil prices in different directions and eventually keep crude oil prices put.
I still speculate that in the short term, crude oil prices will remain near the 100$ mark for WTI spot oil and 110$ for Brent oil.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
15.30 – EIA report about Crude oil inventories
19.00 – FOMC meeting minutes regarding rate decision
13.30 – Department of Labor report – US unemployment claims
15.30 – EIA report about Natural gas storage
Bank of Japan – rate decision and monetary policy statement
For further reading:
- Weekly outlook for May 16-20
- Oil prices moderately declined last week – Weekly recap 9-13 May
- US Petroleum stocks keep on soaring – May 12