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WTI Crude Trades At Premium To Brent For First Time In Over 11 Months
Just as we warned, since the US export ban 'lift' loomed, so WTI prices have shifted notably, having today converged to Brent's price for first time since January. It may have a lot further to fall as some analysts suggest the lifting of the export ban "is going to end up ultimately being bearish everything."
Last week we said...
Brent-WTI set to converge as US begins exporting oil
— zerohedge (@zerohedge) December 16, 2015
And 5 days later...
Brent-WTI has converged...
As for the impact on global markets, OPEC’s Secretary-General Abdalla El-Badri said Tuesday that "any change in U.S. oil policy will have 'zero' impact on global mkts because the country remains an importer."
In the grand scheme of things, you're really just shifting inventory around, Virendra Chauhan at Energy Aspects in Singapore says: “The deal to lift the crude ban is a significant change in U.S. policy, but in terms of the near-term impact on prices, we expect that to be blotchy and sentiment driven. All that you’re doing is transferring the glut from the U.S., where most of the storage capacity is, to elsewhere in the world.”
"Large volumes of crude are unlikely to flow out of the US as soon as the restrictions are lifted," FT writes. "The spread between the price of West Texas Intermediate crude, for delivery in Oklahoma, and internationally traded Brent is only about $1.25 per barrel, meaning that any benefit for US producers from selling in world markets would be swallowed up in transport costs."
"WTI would have to be at least $4 below Brent for exports to work, depending on the cost of shipping," Bloomberg wrote earlier this week, citing Energy Aspects analysts. That means spreads would have to widen to make exports economical. "This is going to end up ultimately being bearish everything," Citi's Seth Kleinman says. "You’re losing on the Brent side, and it’s not clear to me what you’re gaining on the WTI side. In oversupplied market, opening up the export arb changes not exactly nothing, but not far off from nothing."
In any case, “it’s definitely a negative for Brent," Kleinman concludes, "as U.S. crude enters [and already] oversupplied global market."
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playing that spread has been my go-to position for several years. gotta wait until it comes again, but dont think its going to happen. it seemed a low beta arbitrage and proved to be so.
What ships are they going to use? The ones waiting to unload in the Houston ship channel? We are following our proud tradition of doing stuff that'll make things worse......
I called it too!
LOL they are desperate and grasping at straws. I guess they will need to start another major war in the MENA region. Any volunteers?
Send Trump. He's been to military school !
SO since WTI is now more expensive that Brent are they going to rebenchmark RBOB to WTI instead????
Still wondering why gasoline is still more expensive than last year even though AAA is claiming it's cheaper.
let them eat oil
Give me an ObamaCar and I'll consume some oil, maybe. I just like riding my bike.
Well.. to be able to EXPORT? You need to have a SURPLUS PRODUCERS of something.
With US currently have DEFICIT on oils balance (between productions and consumptions).
http://www.eia.gov/tools/faqs/faq.cfm?id=727&t=6
WHAT THE FUCK YOU WANT TO EXPORT YOUR MEAGER OUTPUTS??
So, when i first heard US wants to export its oils? All i can think of? US now goes FULLY RETARDS WITH THEIR MINDS!!
The excuse is that US refiners are designed to handle heavy crude, which is mostly imported, while the current excess US stock is light, sweet, as produced by shale extraction. What is needed is to oblige the US refiners to construct or modify new plants to handle light crude. This needs to be done with sticks, not carrots.
Like the one they used on Hess?
Google Hess Port Reading.
Are you an Obama voter?
If so then I pray that the results of his policies fall on you and not me.
yellen keeps hitting the WTI buy button with her flapjacks
It is not clear in Tyler's first sentence whether he is referring to Brent or WTI as "further to fall." The graph correctly shows the convergence of the two, mostly by increase in WTI. But under current conditions any significant movement of US crude into international markets is doubtful. In any case, IMO, the lifting of the export ban is very poor long term policy. If we are scraping the bottom of the barrel now, what are we going to do when it is all gone? It is like the British in India - exporting grain while Indians starve.
It's pretty clear that the only shortage we have right now is leadership and real world experience. The world seems to be run by spiteful tyrants at this point in time.
there was a contract roll...jan expired yest, feb front today. might account for some of that convergence. not clear which contract months are being used.
Just like anything, there will be winners and losers. The main domestic beneficary will likely be Alaskan producers who can now ship crude to Asian markets.
This move is all about financial paper and not product.
It lowers the global price of oil.
The current (White House?) thinking is that doing so will weaken Russia.
I see the ramp today. They always do that right before more bad news of over production and too much supply. My conclusion is they have insiders letting out the numbers ahead of time. If it closes below 36.27 at days end ...short
Exactly, ramping into the massive inventory build to keep the technicals and momos from dropping even more bearish sentiment
Phew... Buy this man a drink. He's got a mathamatical mind. U Got it..
http://www.bloomberg.com/news/articles/2015-12-22/oil-collapse-sees-vene...
Russia is doing the same, pumping more and more to keep cash flow targets in sight. just means more over supply and lower prices. they are all tryig to make up for losses with volume
Well it certainly destroyed the arb US refiners have enjoyed. Gasoline exports are going to zero.