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’Oil spikes, shocks and stocks
With oil on the rise, what next for equity markets?
That’s the question KBW try to answer in a note out on Monday. The analysts look for correlations over the last 50 years between big (ten and 20 per cent quarter on quarter) WTI rises and changes in the S&P500 and the Keefe Bank Index.
WTI arbitrage is a PADD II windfall
There’s been some interesting commentary on Friday regarding the ongoing problem of the widening WTI- Brent spread, which struck a record wide in like-for-like basis terms on Thursday.
First this from John Kemp at Reuters,
A record WTI-Brent spread, a new paradigm
Here it is, the all time record spread between CME WTI front-month future crude and ICE Brent front-month future crude:
According to our assessment that’s a record on a like-for-like basis on both Bloomberg and Reuters terms (Reuters data quoting a slightly higher historical record from January 2009).
WTI’s upcoming ‘Keystone’ problem
If you thought the distortions in the WTI-Brent spread couldn’t keep going for much longer, you may be interested in the following.
TransCanada’s extension of its Keystone pipeline could see it pumping as much as an additional 156,000 barrels per day into Cushing,
Correlation trading and the WTI-Brent spread
Another day, and another widening in the WTI-Brent front-month future spread — this time to what looks to be approaching record wides.
The spread hit as much as -9.50 on Monday and according to Bloomberg data the record for the differential stands at -10.67,
Oil shock 2.0, or, the benchmark wars
Concerns are mounting that $100 oil prices, if hit, could be enough to dislodge the precarious global recovery — thrusting the world economy back into recession, or even worse, into another global financial crisis.
More on the widening WTI-Brent spread
Reuters is running an interesting story on Thursday that throws further light on the widening WTI-Brent spread, which when we last looked was at $6.42 a barrel.
The newswire claims oil trader Hetco has taken control of the first eight North Sea Forties crude oil cargoes loading in February and two Brent cargoes.
On the implications of a widening WTI-Brent spread
The spread between the two main global oil benchmarks, West Texas Intermediate and Brent, is blowing out (again). And it’s been doing so for most of the month.
We’ve known for a long time, of course,
Oil gusher!
Brent has surged to a 27-month high:
It’s now close to one of those psychologically-important levels:
On the other side of the pond, WTI is moving more slowly:
An unjustified WTI distortion?
JBC Energy has picked up on the ongoing problem of the WTI-Brent forward curve disconnect on Wednesday.
In a nutshell, while Brent futures prices have been jostling nicely into a flattish curve structure (and even a touch of backwardation at the very front end),
Betting on Brent
The contango is widening, floating storage is on the increase, and Brent’s premium to WTI is intensifying by the day (note chart below) — which means only one thing: stocks at Cushing, the physical delivery point for the WTI Nymex contract,
In defence of energy speculators
The FT reports on Wednesday that:
An unsigned paper opposing trading limits circulating in Houston’s natural gas hedge fund community warns that “domestic liquidity will suffer terribly” as CFTC rules grow more onerous.
What’s really moving the energy markets
Supply? Bleh.
Demand? Bleh.
Geopolitical risk? Bleh.
Speculators? Sort of.
Fear of over-regulation? Yup!
That, at least, is the observation of Jeff Korzenik at (in)efficient frontiers this week,
PVM rogue broker update
We have confirmation of the PVM rogue broker story via an e-mailed statement from the company to the wires.
The flashes from Dow Jones read:
*DJ PVM Oil: Victim Of Unauthorized Oil Trading Tuesday
*DJ PVM Oil:
A rogue in crude at PVM
London-based oil brokerage PVM Oil Associates is understood to have parted company with one of its senior long-standing derivatives brokers after allegedly detecting a large unauthorised Brent ICE position on his book.
WTI back on top
Nymex WTI is back at a premium across the entire curve as of Monday.
What does that mean? In the first instance, it implies the Cushing issue has been resolved and that holders of “floating storage”
WTI-Brent spread narrows
Wednesday saw another draw in crude stocks at the Nymex WTI delivery point at Cushing, Oklahoma. With that, many in the market are now expecting a continued flattening of the WTI futures curve away from its current super-contango state,
Bye bye oil contango?
Oil has been trading pretty range-bound of late, but there is one interesting phenomenon occurring in the market.
The contango — with us since the latter part of last year — appears finally to be narrowing both in the WTI and Brent markets,
Every commodity crash has a silver lining
Commodities may have had a disastrous run on Monday, but if you look at the energy complex in detail it wasn’t as bad as is being made out.
Firstly, the Brent contract as traded on ICE is staying firmly above the $40 per barrel mark,
An oil-price cracker too late for some
A bit of momentum has returned to both crude and products. Of particular interest is the strength in naphtha prices — which had suffered the greatest fall in the big commodities sell-off of Q4 2008. The gasoline/naphtha (regrade) spread has narrowed to +30/mt versus a high of +120/mt last year.
It’s all about Cushing
Yes, yes – oil is falling. Nymex WTI is sub $40 per barrel.
But the case of Cushing is becoming increasingly important in regards to the pricing of the contract. Cushing, in Oklahoma, is the delivery point for Nymex WTI,
Rollover, rollover WTI
Just in case there was any confusion, WTI may be at $40.72 per barrel and Brent at $46.24 per barrel but it doesn’t mean there’s major pricing discrepancy.
Brent’s front-month contract has already rolled into the February,
Has crude bottomed?
It’s a brave assumption — what with Merrill Lynch’s call for $25 per barrel crude in 2009 — but could crude have bottomed for the time being? The indicators are looking good. At least that’s the opinion of a number of analysts.