Oil rises as WTI reasserts benchmark dominance

Brent, WTI and the G-20

Once again West Texas Intermediate oil (NYMEX:CLQ13) is trying to regain its historical stature as the world’s global benchmark. WTI is reasserted itself in the global market as U.S. exports soar as oil starts to move out of Cushing, Okla. Oil has gone on a tear surging to the highest level in 17 months after basically going up like a rocket since the beginning of July.

Now part of the move was inspired by the events in Egypt, but there have been other geo-political risks as well. We have seen the war in Syria, Iranian intervention in protests in Bahrain as well as still moving towards Israel’s “red line” when it comes to nuclear weapons. Yet to just attribute the strength to geo-political risk is missing the larger point, despite the fact that the Egyptian coup seemed to light the fuse that started the market explosion. There have been much more at play and more reasons for the Brent/WTI spread to close.

Take the G-20 promising when in doubt to err on the side of printing more money as opposed to austerity. This is giving not only oil a boost but the gold market as well! U.S. crude runs are at an eight-year high at a time when exports have dwindled. Pipeline issues in Canada have caused U.S. refiners to drawdown supply.

Gas prices (NYMEX:RBQ13) are on a tear driven by more bad news on the refinery front. Already AAA reports that gas prices rose 12 cents last week as the national average price for regular unleaded gasoline was $3.67 a gallon at the end of the work week. According to AAA, that puts the price about 23 cents more than last year but still well below the all-time daily high of $4.11 a gallon on July 17, 2008.  We have seen U.S. crude supplies plummet after they hit all-time highs last May and we have seen crude supply fall 27 million barrels in the last three weeks. This comes as US demand for products is rising.

U.S. natural gas is still rising after last week’s bullish inventory report and the steamy weather that was supposed to vacate the Midwest hangs on. So much for the projections that the humidity would ease! The EIA reported just a 58 billion cubic feet increase falling short of getting supply back up to the five-year average. Like I said last week,” traders thought for sure that supplies would get above the five-year average, yet with record demand for power in New York and a heat wave griping the Mid-West the odds are that is not going to happen. Now while temperatures should break next week it is unlikely that Nat gas will break along with it.”

Reuters reported that “The number of rigs drilling for natural gas in the United States rose by seven this week to 369, data from oil services firm Baker Hughes showed on Friday.  Horizontal rigs -- the type most often used to extract oil or gas from shale -- remains unchanged at 1,058.   Oil rigs rose by four to 1,395. North American rotary rig counts.”

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


Comments
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome