Oil Prices – Daily Outlook August 4
Oil prices continued to fall for the fourth straight day, but will this trend continue? Today, the Bank of Japan announced it will expanded its monetary easing plan (USD/JPY reacted and hiked up); ECB will announce its rate decision, the US department labor will publish its US unemployment claims for last week and the EIA will publish its weekly natural gas report.
On Wednesday, August 3rd oil price (WTI) declined by 1.97% to $91.93/b; this is the fourth straight business day in which oil prices were traded down.
Brent also fell by 2.64% to $112.96/b; during August Brent declined by 2.56%.
The chart below presents the normalized prices (July 29th=100) of WTI and Brent during August. It shows the fall of oil prices mainly during June, the upward trend during the first week of July and stability of oil prices since then with a moderate downward trend.
US Oil Stocks Fell by 1.94
The US Energy Information Administration published yesterday its weekly report on the U.S. oil market: according to the report the U.S. oil stocks declined during last week by 1.94 million barrels and reached 1,807 million barrels (See here the recent petroleum report).
The chart below shows the stability of WTI price during the past few weeks and the stocking up of oil stocks as part of a seasonality effect.
BOJ Expanded Monetary Policy
The Bank of Japan announced it will expand its plan to purchase assets, by an additional 10 trillion yen (roughly $126 billion) from 40 trillion yen to 50 trillion yen. This means that the BOJ will further "print Yen" which will reduce its value compared to other major currencies including USD. This news had an immediate reaction in the forex market as the USD/Yen rose very sharply; it's currently traded at 79.5730 as of 13:19 (GMT) which is an increase of 3.2608%. This shift is likely to further strengthen USD against other currencies and might also have a negative effect on oil prices, as it might further pull down oil prices.
USD/ Oil prices – August Update
On Wednesday, Euro/USD exchange rate inclined by 0.84%; the AUD/USD fell by 0.22%; this means that USD had a mixed trend yesterday with major currencies; but currently the US is strongly traded up against major currencies mainly against the Japanese Yen over the recent monetary easing plan the BOJ announced; this likely to adversely affect crude oil prices and trade them further down.
Oil Price Outlook:
Oil prices have experienced a downward trend in recent days as the concerns over the economic progress of the US might affect its demand for crude oil; from the supply side, there are speculations that OPEC (mainly Saudi Arabia) raised its output during July; and finally, during the last couple of days the USD has strengthened against major currencies which also causes oil to trade down. These aspects might be the driving force for oil prices' decline during the last few days; I speculate that crude oil prices will still remain high but will settle at a lower price level than in the past couple of weeks with WTI reaching $88-$92 mark and Brent reaching $108-$111.
For further reading:
Weekly outlook for August 1-5Lior Cohen, M.A. commodities analyst and blogger at Trading NRG.
By: Lior Cohen, Energy Analyst for Trading NRG
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.
