Brent crude and West Texas Intermediate light sweet crude (WTI) have been seeing very different prices in past months. WTI has been falling behind the Brent crude prices. What should be expect in future months? Andrea Tse shares her expectations and predictions.
WTI, of course, remains discounted to Brent these days, as much of the WTI oil remains trapped in the Midwest due to a lack of pipeline infrastructure, resulting in a glut of supply.
Also helping WTI prices Friday was talk among tradersthat Canada may have to start rationing some grades of western Canadian light crude oil, which compete head-to-head with WTI, as pricing drops to the mid-$70 area.
The December Brent crude contract, on the other hand, drifted $1.25 lower to $102.95 as traders unwound WTI-Brent spread trades and frowned on the global benchmark’s exposure to the dire situation of the eurozone and potential ramp-up of Libyan oil supply. The contract broke below the $23 WTI-Brent spread level Friday — the typical discount at which WTI has been trading to Brent.
After breaking short-term support levels the day before, there has been a “big-time follow-through,” TAC Energy trader Mark Anderle said of WTI. WTI is on a “technical tear,” he said earlier today. In addition, “the physical market is healing a glut,” he added.
Recently, there’s been a significant increase in the number of unconventional vehicles — rail, barges and trucks — with trucks often grouped under the same category as barges — being sent to the Midwest to deliver the trapped WTI crude oil to the Gulf Goast.
The Department of Energy’s latest monthly data on crude oil movements shows that July crude oil movement by barge and tanker — the EIA lumps these two together — was at 1.527 million barrels, or a daily average of 49,260 barrels; exceeding the record 1.475 million barrels set in April and coming in nearly six times higher than the next-highest volume seen for July in previous years, said Heinsohn.
WTI will catch back up to Brent crude prices, and recently has. However, the demand for oil is changing, and the demand for resources is also changing. Prices for both could be changing eventually for these reasons.
Quotes taken from report by Andrea Tse, Read the entire article here.
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