Guest Commentary: Oil Prices Daily Outlook 11.02.2011

Oil Prices – Daily Outlook November 2

Oil prices declined for the past three business days; yesterday's falls was probably driven in part by the news from Greece of areferendum. Today the FOMC will release a statement and Bernanke will also give a speech. Today, the ADP of U.S. employment estimate will be published, the EIA oil stockpiles report and the Australian Retail Trade report.

On Tuesday, November 1st oil price (WTI) slipped by 1.07% to $92.19/b; Brent also fell by 0.56% to $018.91/b; during the week WTI shed 1.21% and Brent fell by 1.73%.

Greece's Papandreou Submits EU’s Plan to a Referendum

Following last week's EU agreement on a reduction on the Greek debt, yesterday it was announced that Papandreou, Prime Minister of Greece, has put the European Union’s debt plan to a referendum. This move puts the recent EU agreement on debt reduction for Greece at risk if it won't pass by the Greek voters (see here for more on this subject).

On Today's Agenda:

ADP Estimate of U.S. Change Employment:ADP will give an estimate in the U.S employment for October;

FOMC Meeting (Statement): in the recent FOMC meeting the Federal Open Market Committee came up with its plan to purchase $400 billion worth of LT securities. The FOMC may consider additional steps even though there was a rally in the U.S stock markets during October. Following the FOMC meeting Ben Bernanke will talk about the recent meeting and may provide headlines that could affect the financial markets;

Oil Stockpiles – Rose Last Week

U.S. oil stockpiles slightly inclined last week by 0.7 million barrels, to 1,758.9 million barrels. The oil stockpiles are still well below the quota recoded in 2010: the oil stockpiles are over 100,444 million barrels below oil stockpiles levels recorded during the same week in 2010. Today the EIA will publish its weekly report on last week's changes in the oil stockpiles.

Forex and Oil– October

The Euro/USD sharply declined on Tuesday by 1.12% to reach 1.3703 – the lowest level since January 12th. Furthermore, the USD also appreciated against other exchange rates such as the Euro. If the USD will further appreciate against the risk currencies (AUD, CAD) this may also affect oil prices.

Oil Analysis:

The rally of oil prices in recent weeks coincided with the rally of the U.S. stock markets and probably with the renewed risk appetite in the financial community. That being said, there are still perils along the way for Europe in dealing with its debt crisis and the U.S. economy isn't out of the woods just yet. These factors could affect the price development of oil and could explain the recent shift in oil prices to drop. The decline in the premium of Brent over WTI is probably related to the end of the Libyan war, the concerns of decline in oil demand in Europe and better than expected progress of US economy in Q3 2011 (GDP).

I speculate that during the week, WTI will revolve around $88-$95 mark and Brent around $106-$113.

For further reading:

Gold & Silver Prices – Daily Outlook November 2

Weekly Outlook for October 31 – November 4

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

By: Lior Cohen, Energy Analyst for Trading NRG