Oil prices changed direction and sharply inclined while major stock markets including the S&P500 rose as well. Currently, oil prices are traded with moderate falls. Today, September 8, 2011the ECB rate decision will be announced, the EIA natural gas report will be published, the EIA crude oil stockpiles report, and the Canadian and American trade balance reports.

On Wednesday, September 7th oil price (WTI) sharply rose by 3.86% to $89.34/b; Brent also inclined by 2.25% to $116.19/b; during September WTI inclined by 0.6%; Brent oil rose by 0.84%.

The gap between Brent and WTI continues to be high and has reached yesterday $26.85.  During September, this premium rose by 1.67%. I explain the reasons for the large gap between Brent and WTI oil herein. 

S&P500 / oil prices – September

The S&P500 changed direction and sharply inclined yesterday by 2.86%. This is the first increase in the S&P500 in September.  During August- September the correlation between oil prices and S&P500 was 0.71 for Brent and 0.51 for WTI. If the Stock markets will continue to rise, oil prices are likely to follow and increase as well.

On Today's Agenda:

US trade Balance report: The American trade balance report for June 2011 showed the goods deficit increased by $2.1 billion compared with May 2011. This report is another indicator of the expansion and contraction in US economy and could affect US dollar and consequently the US stock markets and oil prices.

Canadian Trade balance: In the last report exports fell by 1.7%, and imports slipped by 0.21%; as a result, the trade deficit widen to $1.6 billion in June; exports of energy products fell by 5.1%, to $8.7 billion. This report will indicate the changes in exports of energy commodities from Canada and might affect the USD/CAD and consequently oil prices.

US Oil Stocks to be published today

The US Energy Information Administration will publish today its weekly report on the U.S. oil market: according to Bloomberg, U.S. oil stockpiles fell by 2.25 million barrels. In the last re pot, for the week ending on August 26th oil stocks reached 1,794.1 million barrels.

Oil price outlook:

The US stock market indexes sharply inclined yesterday and oil prices rose as well.  The high correlation between oil prices and stock market indexes in recent weeks suggests that the recent gains is more a technical gain than fundamental as traders are regaining their trust in the stock market. In the near future, I still think WTI will remain around $85-$90 mark and Brent around $108-$112, but throughout September oil prices are likely to moderately decline