The West Texas Intermediate (WTI) discount to Brent has narrowed 30 percent in 2013 to close at $13.95/Bbl on Friday March 22, 2013. At the same time Gulf Coast Light Louisiana Sweet (LLS) prices have moved unexpectedly to a $6.75/Bbl premium over Brent. Is the WTI discount to Brent finally unwinding? If so – then why are LLS prices trading above Brent? Today we update our analysis of the WTI/Brent spread.
It looks like a combination of shale crude oil production and inventory drawdowns have been backing out crude oil imports over the past two months. Gulf Coast refineries are leading the way to crank up utilization, increase diesel exports and pull crude oil inventories down from the stratosphere. A lot of this activity seems to be bypassing Cushing. Meanwhile the Gulf Coast is at the center of two big events this week – a tropical storm and a huge refinery fire. Today we continue our analysis of crude inventories.
Over the past month since the NYMEX natural gas contract hit the low of $1.91/MMbtu, the price has screamed upward by $.83/MMbtu, or 44% to $2.737/MMbtu yesterday, up 3 cnts. That’s a pretty good run. Do the fundamentals really support that price level? What has changed in the supply/demand balance to warrant such a turnaround? Is this price run a head fake? We’ll explore these issues today.