Crude oil prices finished the month with rises, but they didn’t recover from their falls at the first week of May. What is up a head for crude oil prices? Let’s examine the crude oil market for today, June 1st:
Crude oil prices – May 2011
May has ended with crude oil price (WTI) rising to $102.7 – a 2.1% increase; despite the recent rise WTI spot oil decreased during May by 9.4%.
Brent oil price also inclined yesterday by 1.34% as it reached 116.73; during May Brent oil declined by 7.8%.
The following chart of the normalized WTI spot oil and Brent oil prices (May 2nd =100) presents how these crude oil prices started off the month with declines and by the end of the month they have bounced back; nonetheless they were still lower than their initial price level in May.
The premium of Brent oil over WTI: this gap reached on Tuesday, May 31st 14.03$/b.
EUR/USD and crude oil prices during May
One of the strongest correlations between crude oil prices and major currencies remains between Euro to US dollar conversion rate and WTI spot oil price, as seen in the chart below. This correlation has been rising in recent months as the link between the daily percent changes of EUR/USD and crude oil prices has tighten.
Yesterday, the Euro to US dollar conversion rate rose by 0.58% and reached 1.4396, and during last week up to yesterday (23/5 to 31/5) it rose by 2.5%; nonetheless, during May the Euro to US dollar conversion rate declined by 2.8%.
These figures coincide with the rises of crude oil prices during the last few days of May (between May 23rd and May 31st WTI spot prices inclined by 5.8%, and Brent oil rose by 6%).
If the US dollar will continue to weaken against the EURO, we might continue to see a rise in crude oil prices.
The S&P500 and crude oil during May
The stock market daily changes also seem to coincide with the daily percent changes of major oil prices: is also very strong linear correlation between the S&P500 daily percent changes and crude oil prices (WTI and Brent oil) as seen in the chart below:
The correlations of these indexes fluctuates vary and aren’t consistent during 2010 and 2011, however, in the last couple of months, crude oil prices seem to have a highly positive correlation with the S&P500; this might suggest that the recent rises (in April) and falls (in May) of these indexes might be linked together.
Petroleum stocks in the US
The US Energy Information Administration will publish tomorrow its weekly report on U.S. petroleum stocks: Bloomberg estimates that U.S. oil stocks decreased by 1.8 million barrels during last week. In the previous report, U.S. Petroleum and oil stocks inclined during last week by 6.7 million barrels, or by 0.38%. For the week ending on May 20th oil stocks reached 1,780.7 million barrels – the highest level since February 18th, 2011 (See here the recent petroleum report).
World news – oil markets
Current crude oil prices
Major crude oil prices are currently traded with mixed trends in the European markets:
The Nymex crude oil price, short term futures (July 2011 delivery) is traded at 103.06 USD / barrel, a 0.36 USD/b rise or 0.35%, as of 09:09*.
The Dated Brent spot oil price declines by 0.35$/b and it is at 116.39 USD / barrel as of 09:19*.
Thus, the current premium of Brent over WTI is at 13.33$/b.
Crude Oil price outlook and analysis:
Crude oil prices finished May with moderate rises, but they didn’t reach their initial level at the beginning of the month.
According to OPEC, the decline in crude oil prices during May might be related to the strong supply and the speculation around the stability in the Middle East mainly in Nigeria – the fourth largest exporter of crude oil to the U.S. Once the uncertainty around the stability of Nigeria dissipated (for now) oil prices came down.
There are many factors that might push oil prices higher: the weakening of the US dollar compared with major other currencies, the feud between Saudi Arabia and Iran in the Persian Gulf, and the increase demand of major economies as we are entering the driving season.
That being said, these factors might have a lesser effect on crude oil prices as long as supply will keep with demand. In the mean time, I still speculate that in the short term crude oil prices will remain at their current high prices around $100 per barrel for WTI 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):
2.30 – Australian GDP first quarter 2011
10.20 – ECB president Trichet speaks
13.30 – Department of Labor report – US unemployment claims
15.30 – EIA report about Natural gas storage
15.30 – EIA report about Crude oil inventories
For further reading: