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Petroleum Report: WTI Forges A New Kind of Parity

August 22, 2013
By: Davis Michaelsen, Pro Farmer Inputs Monitor Editor

The U.S. Energy Information Administration (EIA) reports disruptions to production in Iraq and Libya have had a significant effect over the summer, reducing crude supplies, particularly into the Mediterranean market, an important market for Brent-priced crude oils. In Iraq, persistent attacks on the pipeline from Kirkuk to Ceyhan in Turkey helped push total Iraqi production disruptions to about 290,000 bbl/d in July, up 60,000 bbl/d from June.

According to EIA, n Libya, ongoing labor-related protests at several oil production facilities boosted outages, thereby reducing production to 1.0 million bbl/d in July, down from 1.5 million bbl/d in April. Additional deterioration in the security environment in Iraq or Libya could further reduce OPEC production in the short term. In Nigeria, crude exports were reduced during July and August as deliveries of the country's Bonny Light grade were disrupted by work on key pipelines.supplydisrutpions8 22

Disruptions to global crude oil and liquid fuels production reached nearly 2.7 million barrels per day (bbl/d) in July 2013 (Figure 1), the highest level since at least January 2009. During this same period, global refinery crude oil runs reached their expected 2013 peak. Combined, these developments helped push Brent spot prices to an average of $108 per barrel in July, above the $102-$103-per-barrel average from April through June.

However, this upward price movement was likely muted in part by growing non-OPEC supply in other regions, including growing U.S. production that has reduced U.S. imports of crude oil and in so doing released more barrels from global suppliers to other markets, EIA said.

Crude Oil --

October 2013 WTI crude oil opened today at $103.86 and is still in tune with Brent's chart movements, following technical peaks and valleys. However, while maintaining parity in chart movement, WTI has widened the crude price spread strongly over the week, and we may see $100.00 WTI by the end of next week.

Movements between downtrending spikes since the beginning of the week have been 26 cents Monday to Tuesday, then 50 cents Tuesday to Wednesday, and 7 cents Wednesday to today for Brent crude. Measuring off the same spikes, in the same chart moves, WTI fell 75 cents, then 76 cents and 48 cents into today. This looks like a new form of parity. One in which chart moves are in tune, but the spread is much wider.crstuss8 22

U.S. crude inventories softened 1.4 million barrels to 359.1 million barrels -- now just 1.7 million barrels behind year-ago.

October 13 Brent crude oil futures opened today at $109.60 and topped $110.00 before trailing in line with downtrending resistance.

Currently, the WTI/Brent crude spread stands at $5.61 with Brent on top -- $2.44 cents wider than the same time last week. The techinicals show WTI and Brent spiking at the same time as each marks downtrending resistance. But WTI has far outpaced Brent in the downward trend. This suggests the two respond to the same technical stimuli.

Fuels --

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