WTI Rally Sparked

On February 5, 2014 by TradingDesk

News that the US had granted re-export permits to send $5 billion worth of imported crude (presumably from Canada or Mexico) to Europe last year, helped spark a rally in WTI yesterday, as well as stir the debate over the future of domestic crude oil regulations. The fact that it was economical for companies to ship crude into the US, then put it on a boat and send it to Italy economically shows just how significant the spread between grades of crude oil has become, and what a dramatic impact it can have on local refineries. Overnight, the spread between Brent and WTI dropped below $8, just half its value of 3 weeks ago, as Brent crude seems to be falling victim to weak European equity markets.

RBOB and ULSD futures are continuing their volatile 2014 pattern, while ultimately going nowhere. RBOB continues to hold just above $2.60, temping another 10 cent drop, although we are in the seasonal window of time that has historically witnessed the beginning of a spring gasoline rally. ULSD continues to be a story of heating demand and low supplies in PADD 1 which is causing more extreme swings in prompt month spreads. There is some good news for consumers however, as forward value for diesel are now trading 25-30 cents below year-ago values, giving many an opportunity to lock in fuel prices at an advantageous level.

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