Crude oil prices finished yesterday with moderate rises following the moderate fall on Monday. Today, the US existing home sales will be published and the EIA petroleum market analysis report.
Here’s a short analysis and outlook of the crude oil market for today, July 20th:
Crude oil prices – July 2011
On Tuesday, July 19th crude oil price (WTI) rose by 1.64% to $97.50/b; during July WTI spot oil inclined by 2.31%.
Furthermore, WTI spot oil price shifted direction 10 times in July, which only shows how there is no clear direction for oil prices in recent weeks.
Brent oil price also inclined by 0.8% to $117.37/b; during July Brent oil rose by 5.07%.
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. It shows that in recent weeks crude oil prices zigzagged with no clear trend.
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 Tuesday July 19th $19.87/b; this gap rose by 21.08% during July, mainly because Brent oil price rose while WTI spot oil price nearly didn’t change. The chart below shows that in recent weeks this premium remained near the $20/b 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 last week by 2 million barrels. For the week ending on July 8th crude oil stocks reached 1,796 million barrels an increase of 4.3 million barrels compared to the previous week (See here the previous petroleum report).
US Real Estate Market June 2011
Today the US existing home sales report will be published regarding June 2011 (see here previous report May 2011). Historically, this report had a negative lagged effect on crude oil prices, when controlling for this report’s effect on US dollar: according to Roache et. al (2008)* there is a lagged by one day positive correlation between existing home sales and crude oil price; i.e. as the existing home sales rise, crude oil price rises the following day; in the recent report, the existing home sales declined by 3.8%, and crude oil prices inclined the following day by 1.34%.
*These correlations are based on the research done by Roache et. al (2008) in the paper named “the effects of economic news on commodity prices: is gold just another commodity?”
US dollar / Crude oil prices – July update
Yesterday, Euro to US dollar exchange rate rose by 0.3%, the Australian dollar to US dollar by 1.19% and US dollar to Canadian dollar fell by 1.01%.
This means the US dollar depreciated against major currencies mainly Canadian dollar and Australian dollar. These moves might have strengthened crude oil prices; if this trend will continue it may further strengthened crude oil prices.
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 $98.59 / barrel, a $1.09/b increase or 1.12%, as of 09:15*.
The Dated Brent spot oil price inclines by $0.51/b to $117.87/ barrel as of 09:29*.
Thus, the current premium of Brent over WTI is at $19.28/b.
Crude oil price outlook and analysis:
Crude oil prices continue to zigzag, following their sharp rises at the beginning of July; the demand for oil should incline and push crude oil prices up; furthermore, the US dollar weakened yesterday over the US debt ceiling decision which should be made by August 2nd; finally, there are still concerns from the supply side mainly in regards to the dispute between OPEC and IEA.
Therefore, I still think that oil prices will remain high and might even moderately rise up during the day.
Here is a reminder of the top events and reports that are planed for today and tomorrow (all times GMT):
15:00 – U.S. existing home sales
15:30 – EIA report about Crude oil inventories
15.00 – Ben Bernanke, Chairman of Fed, testifies
15:30 – EIA report about Natural gas storage
For further reading:
Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.