MARKET WATCH: Brent-WTI price spread widens

Benchmark US crude prices continued slipping Feb 8 in mixed trading on the New York market, but North Sea Brent was better supported, finishing the week with its highest closing price since May. The price spread between Brent and West Texas Intermediate widened to $23.18/bbl, the biggest gap since November.

Crude and natural gas futures “both traded down on bearish inventory data, losing 2% and 1% for the week, respectively,” said analysts in the Houston office of Raymond James & Associates Inc. “Energy stocks were mixed, with the OSX (Oil Service Index)  paring its strong year-to-date gains by 1% while the EPX (SIG Oil Exploration & Production Index) rallied by 2%.”

Marc Ground at Standard New York Securities Inc., the Standard Bank Group, reported, “An easing of geopolitical tensions at the beginning of last week saw interest in WTI fade—perhaps more aggressively, given continuing Seaway Pipeline off-take concerns.”

Later last week, however, Iranian authorities rejected an offer from Vice President Joseph R. Biden Jr. for direct talks with US officials while sanctions against Iran remain (OGJ Online, Feb. 8, 2013). Over the weekend, Iranian President Mahmoud Ahmadinejad reiterated his country will not yield to sanctions from Western powers blocking much of Iran’s oil exports.

Growing concerns over the glut of crude inventory at the Cushing, Okla., delivery point for WTI contracts “are also smothering investor enthusiasm since it has emerged that capacity of the expanded Seaway Pipeline will be limited until later this year,” Ground said.

Raymond James analysts said, “Broader markets ended the week with modest gains, extending the winning streak to 6 consecutive weeks. The Standard & Poor’s 500 Index and the Dow Jones Industrial Average continued to creep toward their all-time highs as investors balanced renewed worries about the Euro-zone with bullish economic reports from Asia.”

Meanwhile, the US trade deficit fell nearly 21% in December to its lowest level in nearly 3 years, primarily due to plunging oil imports because of the surge in US production, which in turn has reduced crude prices. Oil and gas prices were down in early trading Feb. 11 with most Asian markets closed for the Lunar New Year holiday. Trading in those markets is expected to be light through much of this week.

Energy prices

The March contract for benchmark US light, sweet crudes slipped 11¢ to $95.72/bbl Feb. 8 on the New York Mercantile Exchange. The April contract dipped 8¢ to $96.27/bbl.

On the US spot market, WTI at Cushing was down 11¢ to match the front-month futures contract closing of $95.72/bbl.

However, heating oil for March delivery continued its rise, up 3.89¢ to $3.24/gal on NYMEX. Reformulated stock for oxygenate blending for the same month escalated 5.89¢ to $3.06/gal.

The March natural gas contract declined 1.3¢ to $3.27/MMbtu on NYMEX ahead of a weekend blizzard that dumped as much as 3 ft of snow in several Northeast states. On the US spot market, gas at Henry Hub, La., fell 10.6¢, also closing at a rounded $3.27/MMbtu.

In London, the March IPE contract for North Sea Brent gained $1.66 to $118.90/bbl. Gas oil for February climbed $16.25 to $1,030.75/tonne.

The average price for the Organization of Petroleum Exporting Countries’ basket of 12 benchmark crudes advanced 77¢ to $114.44/bbl. So far this year, OPEC’s basket price has averaged $110.13/bbl.

Contact Sam Fletcher at samf@ogjonline.com

 

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