Spread Widened to Largest Level Since March

On November 27, 2013 by TradingDesk

The spread between Brent and WTI crudes has widened to its largest level since March overnight, after the API reported a 6.9 million barrel build in domestic crude stocks – bearish for WTI – and a new bout of fighting between government soldiers and Islamic militants in Benghazi Libya caused port workers to walk out on their jobs – bullish for Brent. The spread between the grades is causing further dislocation in domestic refined product markets – particularly gasoline – as mid-continent refiners continue to run at high rates take advantage of cheaper crude. Conventional gasoline in the Group 3 market is trading around $2.30 this morning, while NYH conventional is nearly $2.70. If the combination of Middle East violence and surging domestic production continues, it appears likely that these dislocations will continue throughout the winter.

ULSD meanwhile is on the cusp of a breakout to the upside, with $3.05 the only resistance holding back futures from another rally. The storm sweeping across the US will likely create a few headlines regarding demand for Heating Oil, and while any impact may be short-lived and overshadowed by reduced driving demand – it could be enough to push prices through resistance in what is expected to be a low volume trading day.

The Nymex will be open Thursday and Friday, since the rest of the world is not quite as interested in the pilgrims as we are, but trading volumes should be minimal and should not influence overall trends. Spot markets will not be reported either day. Happy Thanksgiving.

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