Oil Prices – Daily Outlook November 7

Oil prices curbed their rally during last week after they had sharply inclined during October. Today, the German Industrial Production will be published, and the Australian Trade balance report.

On Friday, November 4th oil price (WTI) slightly rose by 0.20% to $94.26/b; Brent also inclined by 1.38% to $112.55/b; during November WTI rose by 1.15% and Brent by 2.77%.

The chart below shows the development of WTI and Brent during October and November (prices are normalized to September 30th).

The premium of Brent over WTI sharply rose on Friday to $18.29 – the highest premium level during last week. During November the premium rose by 12%.

Oil Stockpiles – Rose Last Week

U.S. Petroleum and crude oil stockpiles inclined last week by 1.8 million barrels, to 1,760.7 million barrels. The oil stockpiles are still well below the quota recoded in 2010: the oil stocks are 93,178 million barrels below oil stockpiles levels recorded during the same week in 2010.

U.S. Employment Grew by 80k

In therecent U.S. labor report, the employment grew by 80k; this is the second consecutive positive month for the U.S. labor to grow. This news may also be among the reasons for the light gains in oil prices on Friday.

On Today's Agenda:

German Industrial Production: this report will show the changes in the Germany industrial production and could indicate the progress of the German Economy and consequently may affect commodities traders;

Australian Trade Balance: In the August report, the seasonally adjusted balance of goods and services sharply rose from a surplus of $1,817 million in July 2011 to $3,100 million in August 2011 (see here last report);

Forex and Oil– November

TheEURO/USD slipped on Friday by 0.22%, after it had risen on Wednesday and Thursday. Furthermore, the USD also appreciated against other forex including the AUD and CAD. If the U.S dollar will further appreciate against the risk currencies (AUD, CAD) this may also affect oil to drop.

Oil Forecast:

The rally of oil prices in October started to cool down in recent weeks; the rally of oil prices coincides with the sharp gains of the U.S. stock markets. The recent good news of the U.S. economy (labor report) may help push oil prices further up. On the other hand there arereports of hedge funds reducing their bets on commodities; this shift may curb the recent rally and perhaps even reverse the gains in oil to losses. The decline in the premium of Brent over WTI has reached a halt last week, but may continue to decline if the WTI will keep rising by a larger rate than Brent.

I speculate that during the week, WTI will revolve around $92-$98 mark and Brent around $109-$116.

For further reading:

Gold & Silver Prices – Daily Outlook November 7

Natural Gas Prices Outlook for November 2011

Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.

By: Lior Cohen, Energy Analyst forTrading NRG