Crude oil prices continue to moderately change with no clear direction as they are currently traded up. Today, the EIA will publish its US petroleum stocks report and natural gas report; ECB will decide its rate for July; and the U.S. unemployment claims will be released in anticipation for tomorrow’s employment report.
Here’s a short analysis and outlook of the crude oil market for today, July 7th:
Crude oil prices – July 2011
On Wednesday, July 6th crude oil price (WTI) moderately declined by 0.25% to $94.77/b; during July WTI spot oil added nearly 1.26% to its value.
Brent oil price, on the other hand moderately inclined by 0.34% to $113.92/b; during July Brent oil rose by 2.01%.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil start to rise again as it reached on Wednesday July 6th $17.27/b; this gap rose by 6.28% during July.
Following the spike in the premium of Brent oil over WTI on June 13th in which it reached $23.29/b, this premium declined; it is still fluctuating around the $16-$17 mark.
Petroleum stocks in the US
The US Energy Information Administration will publish its weekly report on U.S. petroleum stocks: according to Bloomberg the U.S. crude oil stocks declined by 2.5 million barrels during last week. In the previous report, U.S. Petroleum and oil stocks very moderately declined by 323 thousand barrels, or by 0.02%. For the week ending on June 24th crude oil stocks reached 1,791.6 million barrels (See here the previous petroleum report).
Goldman and Morgan Stanly remain bullish on oil
According to recent news, Goldman Sachs and Morgan Stanley remain bullish on crude oil; both banks predict in the second half of 2011 a global recovery that will push crude oil prices up due to increase in demand. Goldman Sachs estimates Brent oil price to reach $130/bbl within a year, and Morgan Stanley estimates Brent oil will reach $130/bbl by 2012.
ECB rate decision
Today, the European Central Bank President, Jean Claude Trichet, will announce the ECB rate for July (see here update about ECB rate decision). The rate is currently at 1.25%; there are those how think that Trichet might raise the interest rate by 0.25% (see here an analysis of this issue in Forex Crunch); however, currently the Euros to US dollar is traded down, partly due to Moody’s decision to downgrade Portugal’s debt from Baa1 to Ba2; the fall of the EURO/USD in the past days might also suggest that the market expects Trichet to keep the rate at the same level mainly due to the debt crisis in Europe.
In any case, I think that even if eventually Trichet will raise the ECB rate, this decision won’t have a significant effect on crude oil prices and at best it will moderately push oil prices up; in the last rate raise back in April 13th by 0.25% points, crude oil price inclined the following days by less than 1.5% (each day); therefore, this decision might positively affect crude oil prices, but as stated above there is no evidence to support this claim.
Current crude oil prices
Major crude oil prices are currently traded up in the European markets:
The Nymex crude oil price, short term futures (August 2011 delivery) is traded at $97.39 / barrel, a $0.74/b increase or 0.77%, as of 10:47*.
The Dated Brent spot oil price inclines by $0.46/b to $114.39 / barrel as of 10:47*.
Thus, the current premium of Brent over WTI is at $17/b.
Crude oil price outlook and analysis:
The expected increase in demand for crude oil will likely to affect oil traders to speculate crude oil prices will increase in the near future. On the other hand, the US dollar will continue to affect the crude oil prices and if USD will continue to appreciate against major currencies this could cause crude oil prices to trade down. These two opposing forces are likely to pull crude oil prices in different directions in the near future.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
13:30 – ECB conference Trichet speaks and Euro rate decision
13:30 – Department of Labor report – U.S. unemployment claims
15:30 – EIA report about Crude oil inventories
15:30 – EIA report about Natural gas storage
12:00 – Canada unemployment rate and employment report
13.30 – US unemployment rate report & non-farm employment change
For further reading: