Crude oil prices started off June with falls as they are currently traded down in the European markets. What is up a head for crude oil prices by the end of the week? Let’s examine the crude oil market for today, June 2nd:
Crude oil prices – June 2011
June has commenced with crude oil price (WTI) falling to $100.29 – a 2.35% decrease; during last month, the WTI spot oil decreased by 9.4%.
Brent oil price also declined yesterday by 2.07% as it reached 114.31; during May Brent oil declined by 7.8%.
As seen in the chart below, following the rapid fall at the beginning of May of crude oil prices, they haven’t changed presented a clear trend and remained around the $100 per barrel for WTI and $115 per barrel for Brent oil.
The premium of Brent oil over WTI didn’t change much and reached on Wednesday, June 1st 14.02$/b.
The chart below presents the changes of this premium during 2011. Despite the rapid changes during May, this gap remained around the $10 to $17 and also didn’t present a clear direction.
As presented in the previous crude oil prices analysis, the daily percent changes in US dollar compared with other major currencies are positively correlated with daily percent changes of crude oil prices, mainly Euro to US dollar conversion rate and USD/CAD.
Yesterday, the US dollar strengthened against the Canadian dollar and the EURO by 0.92% and 0.47%, respectively.
This change coincides with the decline in crude oil prices yesterday.
If the US dollar will continue to strengthen against these currencies, this might further weaken the crude oil prices.
US PMI manufacturing index
Yesterday, the U.S. ISM Manufacturing PMI for the month of May was published and reached 53.5%, which is a drop of 6.9 percent points compared with April 2011.
This shows that the manufacturing sector in the US is still growing, but at a lower rate than in the past year. All things being equal, this news might signal a decline in growth of demand for commodities in the manufacturing sector in the US.
Petroleum stocks in the US
The US Energy Information Administration will publish today (instead of yesterday) 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% (See here the recent petroleum report).
World news – oil markets
- There are reported problems in the Canadian pipelines, in particular the Keystone oil pipeline; this might impede the oil transfer and pressure oil prices up;
- In Iran, lawmakers are trying to take the Iranian president Mahmoud Ahmadinejad for his move of decaling himself oil minister;
- Noble Energy announces oil discovery in the deepwater well in the Gulf of Mexico;
- For the recent news on crude oil from the US, Middle East and Europe see here
Current crude oil prices
Major crude oil prices are currently traded down in the European markets:
The Nymex crude oil price, short term futures (July 2011 delivery) is traded at $99.56 / barrel, a $0.73/b drop or 0.73%, as of 09:08*.
The Dated Brent spot oil price declines by $0.29/b and it is at $114.02 / barrel as of 09:19*.
Thus, the current premium of Brent over WTI is at 14.46$/b.
Crude Oil price outlook and analysis:
Crude oil prices started June with moderate falls as they are currently also traded down.
Tomorrow, the US employment report will be published; it’s likely to show a slowdown in the growth in the payroll employment compared with previous months; this might curb the recent rally of US dollar and consequently might drive crude oil prices up. If so, there will likely to be a moderate rise by the weekend.
There are additional factors that might drive oil prices up, such as the feud between Saudi Arabia and Iran in the Persian Gulf.
That being said, these factors might have a lesser effect on crude oil prices as long as supply will keep with demand, and the demand seem to slow down. 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-$115 for Brent oil.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
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
13.30 – US unemployment rate report & non-farm employment change
15.00 – U.S. ISM Non-Manufacturing PMI
For further reading:
- Weekly outlook for May 30 to June 3
- Oil prices inclined during last week – Weekly recap 23-27 May
- US Petroleum stocks– May 26