Crude oil prices continue to decline as the Euro keeps on freefalling. Today, the Canadian and American trade balance will be published along with July’s OPEC report.
Here’s a short analysis and outlook of the crude oil market for today, July 12th:
Crude oil prices – July 2011
On Monday, July 11th crude oil price (WTI) fell again for the second straight business day by 1.09% to $95.15/b; during July WTI spot oil nearly didn’t change and fell by only 0.16%.
Brent oil price, also continued to fell by 0.82% to $116.82/b; nevertheless, during July Brent oil rose by 4.57%.
The chart below shows the changes of WTI spot oil and Brent oil price during July, in which they are both normalized to 100=30 of June.
Premium of Brent oil over WTI spot oil
The premium of Brent oil over WTI spot oil continue to remain high as it reached on Monday July 11th $21.67/b – the widest gap during July; this gap rose by 32.05% during July, mainly because Brent oil price rose while WTI spot oil price nearly didn’t change.
This recent upward trend of this Brent oil to WTI premium might suggest that the European oil market is tighter than the American oil market.
Despite the different directions of Brent oil and WTI crude oil price, there is still a strong linear correlation between these two data series (daily percent changes) during July.
OPEC monthly report
This report will show the main changes in the oil market during June. The most interesting thing in this report will be OPEC countries’ oil production during June. In the last OPEC meeting, members couldn’t reach an agreement about raising the oil production quotas; Saudi Arabia signaled it will raise its oil production in order to compensate for the drop in Libya’s oil production, despite the recent disagreement in the OPEC meeting. If this upcoming report will show an increase in production beyond seasonality, it may help cool down the crude oil market (see here the last review of OPEC’s June crude oil market report).
Euro / Crude oil prices – July update
During July, the EURO depreciated against the US dollar by nearly 3.25%;. During June, the EURO/USD exchange rate was highly correlated with the daily percent changes of crude oil prices. This might suggest that the EURO/USD may have affected crude oil prices and pulled it down.
Following last week’s ECB rate raise, the Euro to US dollar exchange rate kept on falling probably due to the concerns over the recent waiver of ECB on collateral rules for Portugal and the Greece bailout.
If this trend will continue, it may further pull down crude oil prices.
American and Canadian trade balance
Today, the American and Canadian trade balance reports will be published; if they will be positive and show a drop in deficit , it may further strengthen the Canadian dollar and US dollar compared to other currencies which may affect crude oil prices.
In the previous report about the American trade balance for April 2011, the goods deficit decreased and reached $58.1 billion; the service surplus rose to $14.4 billion; as a result, the goods and services deficit decreased by $3.1 billion to $43.7 billion
In the previous Canadian report regarding April 2011, Imports and exports fell during April: exports decreased by 1.9%, and imports declined by 0.6%; as a result, the trade deficit widen from $417 million in March to $924 million in April.
Current crude oil prices
Major crude oil prices are currently traded down in the European markets:
The Nymex crude oil price, short term futures (August 2011 delivery) is traded at $93.58 / barrel, a $1.57/b decrease or 1.65%, as of 08:57*.
The Dated Brent spot oil price declines by $1.92/b to $114.9 / barrel as of 09:09*.
Thus, the current premium of Brent over WTI is at $21.32/b.
Crude oil price outlook and analysis:
Crude oil prices continue to trade down, probably due to the weakening of the Euro. There are also some concerns in regards to the demand for crude oil that may further pull oil prices down. If the economic indicators regarding US and Chinese economies will continue to show a slowdown, it may further reflect in crude oil prices throughout the day.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
Tentative –OPEC monthly report
13.30 –Canadian Trade balance
13.30 –American Trade balance
Tentative –IEA monthly oil report
02.00 –China second quarter GDP
10.00 – EURO AREA industrial production report
15.00 – Ben Bernanke, Chairman of Fed, testifies
15:30 – EIA report about Crude oil inventories
For further reading: