Tale of Two Oil Markets

On November 18, 2013 by TradingDesk

The tale of two oil markets continued last week, as Brent crude had its best performance since Libyan and Syrian concerns caused a sharp price spike this summer, while WTI dropped for the 6th consecutive week. RBOB and ULSD futures both took their lead from Brent, and managed to make a substantial move higher, reducing the likelihood of a major sell-off before year end. As long as the US keeps its status as a major exporter of refined products, it seems likely that futures will follow the international crude grade, while local cash markets may reflect a WTI barrel through discounted basis values.

Such is the case right now, with regular gasoline grades ranging from the low $2.30s in the Midwest – Group 3 market, to nearly $2.70 in the NY Harbor. US Gulf Coast CBOB prices are trading in the middle of that range, just under $2.50.

While fundamental and technical factors seem to favor Brent over WTI, speculative money moved in the opposite direction last week. Managed positions in Brent dropped to their lowest net-long position of the year, while WTI speculative positions gained slightly. Unfortunately, the 3-4 day lag in the data release for these positions means that this movement occurred before the two contracts made most of their moves last week.

A new round of negotiations with Iran will be watched closely this week, and that could be the major influence on prices, as charts remain stuck in neutral for now.

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