Following yesterday’s slow trading day in which crude oil prices didn’t change much, they are currently traded down; will this decline continue? Let’s review and analyze the crude oil market for today, June 17th:
Crude oil prices – June 2011
Yesterday, June 15th, crude oil price (WTI) didn’t change much and inclined by 0.15% to $94.95; during June (UTD) WTI spot oil decreased by 7.55%.
Brent oil price also inclined by 0.18%, and it reached $114.33; during June Brent oil declined by 2.43%.
The difference between Brent oil and WTI spot oil
As seen in the chart below, the premium of Brent oil over WTI rose by 33.84% during June as it reached on Thursday, June 16th $19.38/b.
This finding might indicate that European crude oil market where Brent oil is consumed (among other continents) is further tightening compared with the US oil market.
US dollar and Crude oil prices
During May there were positive linear correlations among crude oil prices daily percent changes and major currencies. These correlations continue in June as seen in the chart below.
As seen above the strongest correlations are among Euros to USD, USD to Canadian dollar, and Australian dollar to USD with WTI and Brent oil prices.
These correlations show that as the US dollar strengthens against major currencies crude oil prices drop. On Wednesday, USD appreciated by 1.79% against Euro, 1.01% against Australian dollar and 1.13% against Canadian dollar. This may have caused crude oil prices to sharply drop by 4.59% for WTI spot oil and 4.53% for Brent oil on that day.
Currently the Euro to US dollar is traded down by 0.3717%, probably because of the concerns over the Greek debt, and the recent Euro stat report showing there is still high Euro Area inflation rate.
These concerns may further strengthen the US dollar and consequently cause crude oil prices to decline.
The recent news showing a rise in China’s holding of US Treasuries may also be among the factors traders will consider to appreciate US dollar.
Current crude oil prices
Major crude oil prices are currently traded with down at the European markets:
The Nymex crude oil price, short term futures (July 2011 delivery) is traded at $92.82 / barrel, a $2.13/b decrease or 2.24%, as of 10:08*.
The Dated Brent spot oil price declines by $1.37/b and it is at $112.96 / barrel as of 10:19*.
Thus, the current premium of Brent over WTI is at $20.14/b.
Crude Oil price outlook and analysis:
Currently, it seems that the US dollar is the strongest factor to affect crude oil prices in recent days; as the US dollar further appreciates against major other currencies it’s likely to further push crude oil prices down.
But there are other considerations that may push crude oil prices back up including the expected rise in demand, mainly in non-OECD countries and the concerns over the crude oil supply.
I still think despite the recent decline in crude oil prices they will continue to remain high in the mid term.
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