{"id":24468,"date":"2012-08-27T01:49:00","date_gmt":"2012-08-26T23:49:00","guid":{"rendered":"http:\/\/beta.next-finance.net\/strategie\/wti-prices-not-keeping-pace-with-fundamentals\/"},"modified":"2012-08-27T01:49:00","modified_gmt":"2012-08-26T23:49:00","slug":"wti-prices-not-keeping-pace-with-fundamentals","status":"publish","type":"post","link":"http:\/\/beta.next-finance.net\/en\/strategie\/wti-prices-not-keeping-pace-with-fundamentals\/","title":{"rendered":"WTI prices not keeping pace with fundamentals"},"content":{"rendered":"<p><em>Most interestingly, WTI has not only lagged behind Brent, but also behind Canadian crude oil prices, with Canadian Mixed Sweet crude oil at Hardisty having rallied more than $32\/bbl from its June lows, and this has occurred despite the fact that crude oil inventories at Cushing have been drawing. We do not see the resulting widening of the WTI-Brent spread as sustainable.<\/em><\/p>\n<p><strong>WTI-Brent widening and WTI falling below Canadian grades even<br \/>\nas Cushing inventories draw<\/strong><\/p>\n<p>Cushing crude oil inventories began to draw shortly after the reversed<br \/>\nSeaway pipeline came online in late May, loosening a bottleneck that<br \/>\nprevented rising crude oil production in the Bakken and Canada from<br \/>\nreaching the US Gulf Coast. However, while the reversal of the Seaway has<br \/>\nshifted the Cushing crude oil market back into deficit, allowing inventories<br \/>\nto draw, the WTI-Brent spread has widened out to -$17.70\/bbl rather than<br \/>\nnarrowing. We do not see this widening of the WTI-Brent spread as<br \/>\nsustainable, and we continue to expect it to narrow going forward. In<br \/>\nparticular, with WTI now pricing near parity or below Canadian grades, we<br \/>\nexpect flows into Cushing will slow, accelerating the draw on Cushing<br \/>\ninventories and putting greater upward pressure on WTI prices.<\/p>\n<p><strong>Repositioning our trade recommendations as risk-reward on the<br \/>\nWTI-Brent narrowing looks better in 2013 after Seaway ramps up<br \/>\nto its full capacity<\/strong><\/p>\n<p>With the conversion of BP\u2019s Whiting refinery scheduled to begin in 4Q12<br \/>\nand the potential for a US SPR release rising with the tensions with Iran,<br \/>\nwe think the risk-reward to the WTI-Brent spread narrowing is better in<br \/>\n2013, after the Seaway ramps up to 400 thousand b\/d, than in 2012.<br \/>\nConsequently, we are changing our trading recommendation to be long<br \/>\nSeptember 2012 WTI futures as they approach expiry. We are maintaining<br \/>\nour view that a tightening global crude oil market will force prices higher<br \/>\nby rolling our long September 2012 WTI trade recommendation<br \/>\ninto a recommendation to be long the S&#038;P GSCI Brent crude oil<br \/>\ntotal return index, carrying forward the potential loss on the September<br \/>\n2012 WTI long futures position of 10.77%. In addition, we introduce a<br \/>\nlong June 2013 WTI-Brent spread trade recommendation, at an<br \/>\ninitial value of -$12.33\/bbl.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>WTI prices have rallied over $18\/bbl from their June lows. However, the rally in WTI prices has failed to keep pace with the rally in Brent prices, which are up more than $24\/bbl from their June lows.<\/p>\n","protected":false},"author":1,"featured_media":24466,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1483],"tags":[2073,1671,1744,1651,1807,1746,1693,2068],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/24468"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=24468"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/24468\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/24466"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=24468"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=24468"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=24468"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}