Oil prices bounced back and rose by over 2% after they had remained nearly unchanged a day earlier. Today Greece will decide on the budget cuts, but the news doesn’t seem to stir up the market for now. Related news that could affect oil prices today include the US petroleum stocks report by the EIA, and the US pending home sales.
Here’s a short analysis and outlook of the oil market for today, June 29th:
Oil prices – June 2011
On Tuesday, June 28th oil price (WTI) bounced back and inclined by 2.52% to $92.89/b; during June (UTD) WTI shed nearly 9.55% of its value.
Brent price also inclined by 2.17% to $108.69/b; during June Brent declined by 7.25%.
Premium of Brent over WTI
The premium of Brent over WTI remained nearly unchanged and reached on Tuesday June 28th $15.8/b; this gap rose by 9.12% during June.
Following the spike in the premium of Brent over WTI on June 13th in which it reached $23.29/b, this premium fell to similar levels it was back in the beginning of June.
Petroleum stocks in the US
The US Energy Information Administration will publish today its weekly report on U.S. oil stocks: according to Bloomberg the oil stocks fell by 2.7 million barrels during last week. In the previous report, Petroleum stocks rose during previous week by 3.084 million barrels, or by 0.17%. For the week ending on June 17th oil stocks reached 1,791 million barrels (See here the previous petroleum report).
US pending home sales
Today, the US home sales report will be published and will present the major changes in pending home sales during May 2011; in the recent report regarding April there was a decline in number of homes sold despite the rise during the March and February; this report is likely to show an ongoing decline in sales as the US economy is slowing down. If this will be the case, it might adversely affect oil prices: according to a research done by Roache et. al (2008) a working paper on the effects of news on commodities including oil, it was shown that a decline in the Existing home sales caused a significant adverse effect on oil the following day (a lag effect). If this will be the case, we might see a moderate downward effect on oil.
The Greek Debt and oil
Today the Greek parliament will vote on the major budget cuts proposed by Greece’s Prime Minister George Papandreou. There is heavy opposition against these budget cuts, but Failure to pass these budget cuts could result in the European Union not approving the recent bailout funds Greece needs to avoid default of its loans. Since the Euros to US dollar is strongly correlated with oil, the changes that this exchange rate will endure due to the news related to the Greek debt could possible also affect oil. Currently, the news from Greece doesn’t seem to affect Euro/USD.
Oil price outlook:
The Greek debt will continue to affect Euros/USD and consequently might also affect oil; the news over IEA releasing 60 million bbl of oil might have brought down oil last week, but currently this affect is terminal as oil prices already started to bounce back; furthermore oil might soon start to pick up again as we are entering the summer in which the seasonal effect will bring demand for oil up and hike oil price again.
Here is a reminder of the top events and reports that are planed for today (all times GMT):
13.00 – Canadian Core CPI
15:00 – U.S. pending home sales
15:30 – EIA report about oil inventories
For further reading: Oil prices Monthly outlook –June 2011
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