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Gigantic gold coin (32,000 troy ounces) makes its way to Wall Street

Wall Street strengthened on Friday and is heading for the second best week since the beginning of the year. The DJIA was gaining +0.42% while the S&P 500 index climbed +0.21% higher at the time of writing. In the commodity sector, crude oil prices remained firm although the chance of an imminent military attack against Syria appears unlikely.

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US Shares Strengthen as Weak Data Dampened Tapering Speculations

Sentiment remained firmed ahead of the European opening as a US-led military strike appears less likely as Syria accepted Russia’s proposal to hand over the chemical weapons stocks for UN’s inspection and the US Congress delayed a vote. The front –month contract for WTI crude oil dropped -1.94% and the Brent crude contract plummeted -2.17% during the day. Both benchmarks have remained weak. Gold dropped to 1357.6, the lowest level in 3 weeks.

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Crude Plunged as Geopolitical Tensions Eased

Crude oil prices ended the 6-day gain ahead of the FOMC minutes in which Fed officials might have signaled QE tapering to begin in September. The front-month contract for WTI crude oil slipped -0.34% while the Brent crude contract was down -0.45%. Gold failed to benefit from heightened speculations of stimulus reduction rising yields raised the cost of owning gold.

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Crude Oil Weaker amid Concerns over Fed Governor

US Light WTI crude oil futures are marching toward $106 a barrel in trading on Friday and the spread between NYMEX and ICE Brent oil contracts is now at it’s lowest since wayback in 2010 with the rise of WTI seen by a dramatic tilt in the curve formed by futures prices.

Latest WTI Oil Price

US Light crude oil futures for August 2013 delivery was trading at $105.41 a barrel, 14:16 GMT on the NYMEX, earlier this morning the contract hit $105.83. The jump in WTI has also been accompanied by a dramatic tilt in the curve formed by futures prices.

The August delivered US crude contract now trades for $12 more than futures delivered in August 2014, a complete reversal from a year ago. This premium for near dated contracts, known as backwardation can encourage oil traders to draw down inventories because there is little incentive to store crude.

IEA Oil Demand Forecast

US WTI oil futures fell on the NYMEX on Thursday followin the IEA’s latest forecast that oil output from producers outside of OPEC would outpace the growth in global oil demand.

The IEA expects output from non-OPEC producers to rise by about 1.3 million barrels a day next year, an annual growth rate that has only been achieved once in the last 20 years. It estimated supply growth this year at 1.2 million barrels a day.

However, the EIA also pointed out that US crude stockpiles fell 9.9 million barrels for the week ended July 5, outstripping expectations by analysts polled by Platts for a drawdown of just 3.8 million barrels.

Eyes on Suez Canal

Investors have been watching for any word about supply disruptions at the Egyptian controlled Suez Canal and the Suez Mediterranean pipeline to clues for the short term direction for oil prices.

Head of Suez Canal Authority General Muhab Mamesh has confirmed that navigation movement in the Canal is still normal commenting that there was full co-operation between the authority and Egyptian armed forces in the area “to secure and protect the Suez Canal 24 hours a day.”

WTI to Brent Spread

Brent has traded at a substantial premium to WTI in the last two years because of transportation issues linked to the pricing and distribution hub for WTI in Cushing, Okla.

But the US EIA earlier this year estimated that new projects would provide 1.15 million barrels per day of additional pipeline capacity to delivery crude from Cushing to the Gulf Coast, with another 830,000 barrels per day planned to move crude directly from the Permian Basin to the Gulf, according to Capital Economics.

“This should reduce the excess inventories at Cushing, lower the cost of shipping WTI to where it is most in demand and allow it to compete on a more level playing field with Brent, all helping to collapse the WTI to Brent spread.” said Julian Jessop, head of commodities research at Capital Economics.

Most analyst’s now expect the spread between both contracts to disappear by the end of this year or maybe sooner still…

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WTI oil price marches toward $106 as spread to Brent lowest since 2010

US WTI crude oil opens Tuesday’s trading session nearing the magic $100 a barrel marker just as banking giant Barclays comments on the volatility of crude oil futures, suggesting that prices could well rise again from here.

Latest WTI oil Price

US Light crude oil futures for August 2013 delivery was trading at $98.20 a barrel, 08:22 GMT this morning in electronic trading on the NYMEX, or 0.3 percent higher. WTI crude rose $1.43 or 1.5 percent, to end at $97.99 a barrel on Monday. WTI crude oil futures have been stuck between $90 and $98 a barrel for most of the past six months.

Barclays Oil Price Forecast

Barclays believe that the oil market has become too complacent and greater volatility may be on the way for oil prices.

“We think now is an appropriate time to buy medium-term (three- to six-month) options on WTI futures, for a few reasons,” say analysts at the bank.

First, the market may come to perceive that any Fed tightening is damagingly premature if it is based on an improving labour market at a time of softer economic indicators elsewhere. Second, euro zone woes may return. “If the past episodes of risk flare in the euro zone are anything to go by, there is massive room for oil volatility to appreciate.”

Middle East Tensions

Meanwhile, oil investors are once again keeping an eye on Egypt, where millions of protesters have demanded the resignation of President Mohammed Morsi. On Monday, Egypt’s military said it would intervene if the president is unable to resolve the crisis within 48 hours.

The turmoil in Egypt, combined with the ongoing civil war in Syria, is raising concerns about instability spreading to other areas of the oil rich Middle East which may well push oil prices higher.

Egypt’s Suez Canal is one of seven key world oil choke points, according to the US EIA (Energy Information Administration). About 4 percent of world oil moved through that choke point daily in 2011, according to the agency’s data.

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WTI oil price nearing $100 as Barclays signals “buy” for crude futures

ECB’s rate cut and indications for further easing lifted the stock and commodity markets. Wall Street gained with the DJIA and S&P 500 indices adding +0.89% and +0.94% respectively. Asian shares also climbed higher today.

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Sentiment Lifted as ECB Resume Easing

The US Dollar Index opened today’s trading session lower, near 82 levels after monthly consumer spending figures in the US slowed in March, growing only 0.2 percent from a 0.7 percent rise in February.

Latest Dollar Index Rates

The ICE US Dollar Index, which tracks the greenback against a basket of six major world currencies was at 82.13, 07:04 GMT this morning.

Disappointing US Data

Disappointing data including slower than expected US economic growth in the first quarter (released last Friday) has led Treasuries yields lower in the past few weeks, as investors again grapple with the prospect that the American economy will at best only muddle along this year. The US economy expanded at a 2.5 percent annual rate in the first quarter, the Commerce Department said on Friday, short of expectations of 3.0 percent and setting a cautious tone.

The report out yesterday also raised some concerns that Fed will need to continue its bond purchase program for longer than expected.

“Investors will look for indications that the disappointing US data of late may have changed the policy outlook for coming months,” said analysts at Citigroup.

“In particular, evidence that the FOMC sees renewed downside risks to growth or inflation could add to cyclical headwinds for the US dollar.”

Fed Meeting

The Federal Reserve will meet later today and tomorrow, and the report of weak first quarter growth could reinforce expectations the Fed will keep purchasing bonds at a pace of $85 billion a month. Economists do not expect much change in Fed policy, but will keep close watch on the meeting for clues over the future of the Fed’s stimulus program, especially after GDP growth fell short of forecasts.

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Dollar Index falls back to 82 after US consumer spending figures dip

In the commodity sector, oil prices plunged with the front-month WTI crude contract slipped to as low as 91.91 before ending the day largely unchanged at 92.52. The Brent crude contract plummeted for a 4th consecutive day to 107.91, the lowest level in 3 weeks, before settling at 108.52, down -1.03%. In the commodity sector, gold slipped after failing to re-test 1600.

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Crude Weakened on Inventory Increase

European Brent oil has added around $4.00 a barrel in the last week and may well continue on an upward path with technical resistance at around $118, however economic worries in Europe and the US are still playing a part in keeping a lid on much higher oil prices for now.

Latest Brent Oil Price

In London, ICE Brent oil futures for March 2013 delivery closed Friday’s session at $116.59 a barrel on the ICE Futures Exchange, up from around $113 at the start of the week. The current price of Brent is at a three month high with most of the gains added in the last few days.

Oil Demand and Prices

Oil prices are rising again as speculators factor in the possibilities of a boost in demand from the US and Europe with better than expected European data adding some optimism over the global economy. EU sentiment improved more than expected across all sectors in January, rising for the third month in a row in a sign that the region’s economy could be emerging from a low point in the fourth quarter of 2012.

On Thursday however, oil pared gains on release of surprisingly weak US growth figures and disappointing economic data from China.

Middle East Supply Concerns

Brent oil prices have spent the last 6 months hanging around $110 a barrel while the West attempts to kickstart sluggish economies. But I feel the main driver of high oil prices comes back down to the same old story of supply concerns from the Middle East.

On Thursday, Syria protested to the UN over an Israeli air strike on its territory and warned of a possible “surprise” response. Meanwhile, Iran’s uranium enrichment plans look set to slip into a higher gear. Iran wants to upgrade its main enrichment plant at Natanz. The upgrade could speed up enrichment by as much as two or three times, something that worries the West.

Currently, international negotiations surrounding Iran’s nuclear program are stalemated by disagreement over the venue and date for the next encounter between Iranian negotiators and outside powers.

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This article was written by: JR @ liveoilprices.co.uk

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Brent oil looks bullish again but economic worries may squeeze gains