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Guest Commentary: Oil Prices Weekly Outlook January 30 - February 3

Guest Commentary: Oil Prices Weekly Outlook January 30 - February 3

2012-01-30 15:24:00
Lior Cohen, Energy Analyst for Trading NRG,
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Oil slightly rose during last week and thus continued their trend of moderate changes of recent weeks. What should we expect for oil prices in February? Let's examine the oil market the main news items and events that may affect the direction of oil prices in the days to come.

On Friday, January 27th oil price (WTI) slightly fell by 0.14% to $99.56/b; Brent on the other hand increased by 0.40% to $110.72/b; during last week, WTI rose by 1.12% and Brent by 0.99%.

In the chart below are the changes of WTI and Brent during January (prices are normalized to December 30th).

Guest_Commentary_Oil_Weekly_Outlook_January_30_body_oil_p_February_3.png, Guest Commentary: Oil Prices Weekly Outlook January 30 - February 3

During January the correlation between Brent and WTI was still strong and positive. This means that the relation between WTI and Brent is still strong and tight.

Guest_Commentary_Oil_Weekly_Outlook_January_30_body_Correlations__February_3.png, Guest Commentary: Oil Prices Weekly Outlook January 30 - February 3

Main Oil Related News Items

U.S. ISM Manufacturing PMI: During December the index rose to 53.9% a 1.2 percent point gain; this index might affect oil market (see here my review of last report);

U.S. non-farm payrolls: in December, the labor market showed improvement as the number of non-farm payroll augmented by 200k (see here my last review on the U.S employment report);

Oil Stocks – Rose Last Week

U.S. oil stockpiles rose during last week by 4.2 million barrels and reached 1,743.4 million barrels. The current stocks are still below stockpiles levels recorded during the same week in 2011.

The upcoming report will come out on Wednesday, February 1st and will refer to the week ending on January 27th.

Forex and Oil – January

The EURO/USD sharply increased during last week by 2.23%; the AUD/USD also augmented by 1.66%; I speculate the positive correlation between oil prices and EURO/USD will keep affecting the direction of oil. If the USD will further depreciate against the Euro during the week, it might also pressure up oil.

Oil Analysis:

Oil prices only moderately changed during last week. I suspect there are two opposite forces that have the potential to affect the direction of oil prices: from the demand side, the negative projection of the EU countries growth rate and stability in 2012 that might affect their demand for oil. From the supply side, the tensions between Iran and the West. These two forces can pull oil in different directions. For the time being, however they don't seem to affect the oil market.

I speculate that during the last week of January, WTI will continue to trade in the range of $97-$103 and Brent between $107 and $113.

For further reading:

Weekly Outlook for 30 January – 3 February

Gold and Silver Prices Weekly Outlook for January 30- February 3

By: Lior Cohen, M.A. in Economics, Commodities Analyst and Blogger at Trading NRG

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