WTI: losing the edge on Brent

Since February, the spread between Brent and WTI had been narrowing as the price of WTI increased at a faster pace than the price of Brent. But no more… The spread reached a bottom on 19th July close to $0 (Brent and WTI trading at roughly the same price) and has been widening since then. Here are a few reasons why this spread could continue to widen in the near term:

This spread narrowed close to $0 earliest this month; this was the lowest level since early 2011 and was looking extremely stretched to the downside, and thus due a recovery.
US crude oil and gasoline inventories recovered in mid-July .Gasoline inventories increased from -2.6mn barrels to 3.05 mn barrels. Since we are in the middle of “driving season” in the US, it is important to have plentiful gas supplies, which has helped to ease upward pressure on the WTI oil price.
The protests in Egypt have flared up once again, and some of the deadliest occurred close to the Suez Canal, one of the main distribution routes for crude supplies. When deliveries of crude from the Middle East are threatened, this tends to boost demand for Brent.
There is a chance that disappointing US GDP released on Wednesday, could exacerbate the pressure on WTI and cause the spread to narrow further in the short term.

Takeaway: The spread between Brent and WTI looks like it has made a medium-term low and we could be in for a period of Brent outperforming WTI for the first time since early 2013.

Источник: Forex.com

30.07.2013