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 [email protected]
Sam Fletcher | Senior Writer
I'm third-generation blue-collar oil field worker, born in the great East Texas Field and completed high school in the Permian Basin of West Texas where I spent a couple of summers hustling jugs and loading shot holes on seismic crews. My family was oil field trash back when it was an insult instead of a brag on a bumper sticker. I enlisted in the US Army in 1961-1964 looking for a way out of a life of stoop-labor in the oil patch. I didn't succeed then, but a few years later when they passed a new GI Bill for Vietnam veterans, they backdated it to cover my period of enlistment and finally gave me the means to attend college. I'd wanted a career in journalism since my junior year in high school when I was editor of the school newspaper. I financed my college education with the GI bill, parttime work, and a few scholarships and earned a bachelor's degree and later a master's degree in mass communication at Texas Tech University. I worked some years on Texas daily newspapers and even taught journalism a couple of semesters at a junior college in San Antonio before joining the metropolitan Houston Post in 1973. In 1977 I became the energy reporter for the paper, primarily because I was the only writer who'd ever broke a sweat in sight of an oil rig. I covered the oil patch through its biggest boom in the 1970s, its worst depression in the 1980s, and its subsequent rise from the ashes as the industry reinvented itself yet again. When the Post folded in 1995, I made the switch to oil industry publications. At the start of the new century, I joined the Oil & Gas Journal, long the "Bible" of the oil industry. I've been writing about the oil and gas industry's successes and setbacks for a long time, and I've loved every minute of it.
