World events on Oct. 15 “conspired to drive a deeper wedge” between West Texas Intermediate crude futures prices and those for Brent crude, according to analysts with Standard New York Securities Inc., the Standard Bank Group.
“The front-month spread rose to a 1-year high ending the day at $23.95/bbl,” analyst Marc Ground reported. “Once again, most of the action came from Brent, which ended the day up $1.18/bbl to close at $115.80/bbl. WTI was largely unchanged for the day, closing at $91.85/bbl,” he said.
“Supply concerns served as the catalyst for Brent’s upward move,” Ground said, adding, “The European Union confirmed a tightening of sanctions on Iranian oil exports. It was also reported that the restart of the Buzzard field in the North Sea after maintenance would be delayed by up to 14 days—commencing production on either Oct. 19 or 20. However, the exact date of resumption is as yet unconfirmed by Nexen Inc.”
He said, “Keeping WTI in check are concerns over high crude oil inventory levels and demand destruction in the US. We have highlighted before…that looking at distillate inventories, we feel that there is significant potential for rising crude oil demand from this avenue as we move into the US winter. Distillate inventories have been particularly low, below what we’ve seen over the past five years. Even in terms of days of supply, the level of distillate stocks has been well below the 5-year average. The strong drawdown in the DOE’s reported distillate inventory level (-3.2 million bbl) in this week’s data only reinforces this view.”
Ground concluded, “An easing of Middle East tensions, in particular the Turkish-Syrian friction…could see a narrowing of the WTI-Brent spread over the near term. However, we do feel that Middle East tensions remain significant enough to keep the spread from closing too dramatically.”
The November contract for benchmark US light, sweet crudes slipped 1¢ to $91.85/bbl Oct. 15 on the New York Mercantile Exchange. The December contract increased 4¢ to $92.32/bbl. On the US spot market, WTI at Cushing, Okla., was down 1¢ to $91.85/bbl.
Heating oil for November delivery declined 1.48¢ to $3.21/gal on NYMEX. Reformulated stock for oxygenate blending for the same month decreased 4.25¢ to $2.85/gal.
The November natural gas contract fell 12.5¢ to $3.47/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., decreased 0.5¢ to $3.345/MMbtu.
In London, the November IPE contract for North Sea Brent increased $1.18 to $115.80/bbl. The new front-month November contract for gas oil fell $3.25 to $997.75/tonne.
The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes retreated 36¢ to $110.70/bbl.