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Guest Commentary: Oil Prices Weekly Outlook December 12-16

Guest Commentary: Oil Prices Weekly Outlook December 12-16

2011-12-12 18:16:00
Lior Cohen, Energy Analyst for Trading NRG,

Oil prices slightly declined during last week after oil prices rose during the past couple of months including November and October. There are many news items on next week's agenda including the OPC meeting and OPEC and IEA's monthly report on the global oil market. The oil stockpiles rose again during last week for the second straight week.

On Friday, December 9th oil price (WTI) slightly rose by 1.09% to $99.41/b; Brent also inclined by 1.27% to $108.73/b; during last week WTI decreased by 1.56% and Brent by 0.70%.

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

Guest_Commentary_Oil_Prices_Weekly_Outlook_December_12-16_body_Crude_12.png, Guest Commentary: Oil Prices Weekly Outlook December 12-16

Despite the ongoing decline in the premium of Brent over WTI, the correlation between the daily percent changes of Brent oil and WTI also sharply rose during December after it had sharply declined during October and November.

Guest_Commentary_Oil_Prices_Weekly_Outlook_December_12-16_body_Correlations__12.png, Guest Commentary: Oil Prices Weekly Outlook December 12-16

Main Oil Related News Items

OPEC Meeting: the upcoming OPEC meeting will be held in light of the recent developments in the Middle East including the sanctions placed on Iran and the progress of Libya's oil production; OPEC countries will decide on its future oil production quota for 2012; this meeting could have influence oil traders mainly if there will be a sharp change in the oil production quota (See here a summary of the last meeting); The meeting will be held on Wednesday, December 14th.

OPEC Monthly Report: this report will show the main changes in crude oil and natural gas's supply and demand worldwide; the report will also analyze the development in the production of OPEC countries (mainly shed some light on Libya's production levels) during October (See here a summary of the last November report);

IEA monthly Oil Report: this upcoming report will present an updated (as of November) outlook and analysis for the global crude oil market for 2011 and 2012 (See here a summary of the last report);

Both reports will be published on Tuesday, December 13th.

Oil Stocks – Inclined Last Week

U.S. Petroleum and oil stocks rose for the second consecutive week, last week by 9.5 million barrels and reached 1,749.93 million barrels. The current oil stocks are still 77,406 million barrels below oil levels recorded during the same week in 2010. The next report will be published on Wednesday, December 14th.

Forex and Oil– December

The EURO/USD very slightly declined during last week by 0.11%; this exchange rate had a sharp drop on Thursday following the ECB press conference in which the ECB President stated his negative position on future bond purchase plans. During last week not only the Euro slightly depreciated against the USD, but also other rates. If the USD will continue to strengthen against the Euro and AUD, this may also affect oil to trade down.

Oil Prices Analysis:

Oil prices didn't do much last week and only moderately declined. The OPEC's meeting next week might affect oil especially if there will be some breaking news on OPEC's oil production. From the demand side, the upcoming U.S. reports that will be published such as the US retail sales, will shed some light on the development of the U.S.'s economy and thus on the projections on its demand for oil. If the U.S. will continue to show improvement and the EU countries will also start to present growth, this could also help stabilize oil prices.

Finally the effects of related markets such as Forex and Stocks markets on oil market will continue to be among the prime reasons for development of oil prices. The upcoming FOMC meeting could affect these markets mainly if there will be another stimulus plan and in such a case could drive oil up.

I speculate that during the upcoming week, WTI will revolve around $97-$103 mark and Brent around $105-$113.

For further reading:

Weekly Outlook for 12-16 December

Gold and Silver Prices Weekly Outlook for December 12-16

By: Lior Cohen, Energy Analyst for Trading NRG

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