Crude oil market spread is expected to exceed $20

Since 2011, the price difference between Brent and WTI has broken the previous operating range of US$5/barrel to US$5/barrel, and rushed to above US$26/barrel in September 2011. The investors are ecstatic. In 2012, the spread between the two countries began to soar again from around US$8/barrel, which has now risen to around US$17/barrel. So, will the 2012 wave of spreads rise again? Given that geopolitics have not yet subsided, the European supply pattern has not been optimistic, and Europe and the United States have been affected by multiple factors such as winter contrast. I believe that the spread is expected to continue to rush above $20/bbl.

Geopolitics still not settled Iranian President Mahmoud Ahmadinejad announced last week that it will announce major nuclear progress this week. This news once pushed oil prices high. The news was honored on February 15. Iranian experts loaded the first batch of domestically produced nuclear fuel into Tehran on that day. The reactors, with the exception of Iran’s own hard-line attitude, did not suffer the slightest decrease, the neighboring countries and the United States continued to exert pressure on Iraq. The Israeli Deputy Prime Minister has repeatedly called on the international community to step up sanctions against Iran in order to force Iran to terminate its nuclear program. US State Department Spokesman Victoria Newland also said on the 14th that India, Georgia and Thailand have successively attacked. The United States is investigating the connection between these events and other attacks by Iran. Judging from the recent situation, Iran and other Middle East issues cannot be resolved in the short term, and relevant news may stimulate the crude oil market from time to time. As a result, Brent oil prices will continue to remain high, and this will reduce the influence of the United States, which is far from the Middle East and does not import oil from Iran. This means that the impact on WTI oil prices will be relatively limited, thus supporting the spread between the two. Stronger.

European oil supply pattern is not optimistic According to the latest data from the International Energy Agency, the increase in production in Libya and production in Saudi Arabia have been maintained at 10 million barrels per day. The actual output of OPEC reached 30.9 million barrels per day in January 2012. This is since 2008. The highest value since. However, it should also be noted that production, including Sudan, Yemen and Syria, has been reduced by 1 million barrels/day due to the impact of the domestic situation. More importantly, the OECD’s oil inventories in January have already been around 60 million barrels lower than the five-year average, far below market expectations.

In fact, there are many times the wrong signals about adequate supply are due to too much attention to the crude oil inventories data released by the US Energy Agency. From July 2010, US crude oil inventories were much higher than the five-year average in many times. Although crude oil inventories fell back in the fourth quarter of 2011, stocks began to rise rapidly again in 2012 and ended in February 10. On the same day, Cushing’s stock returned above 30 million barrels for the second consecutive week.

The OECD’s oil stocks have been declining. While the stocks of the United States, one of the member countries of the OECD, have continued to rise, this can only be explained by the abnormality of stocks of other member countries. The most likely is the EU that is about to impose an embargo on Iran. . In other words, the European oil supply is not so optimistic. The IEA report validated this view, which shows that European oil inventories have fallen to the lowest level since 2003. This is a bullish support for Brent crude oil, and the high US crude oil inventories has weighed on WTI prices, thus supporting the spread of the two to continue to spread.

Climate differences in Europe and the United States will continue In general, after January, with the departure of the United States during the winter, its crude oil consumption has entered the off-season. This year, the United States has entered the off-season consumption period ahead of schedule, mainly affected by the warm winter. According to data from the National Weather Data Center of the United States, 2,892 winter maximum temperatures were recorded across the country this winter, which made the demand for heating oil significantly lower than market expectations, and was also the main reason why the crude oil inventories analyzed above had risen so quickly.

In stark contrast to this is the extremely cold weather in Europe this year. This year, the lowest temperatures in some parts of Europe and the largest snowfall in decades have occurred in several parts of Europe, which has made European multinational energy an emergency. According to the United Nations Weather Service, the extremely cold weather that ravages Europe will continue until the end of the month. Obviously, the demand for crude oil will not quickly weaken.

Spread is expected to exceed $20 Given the situation in the Middle East, Europe's tight supply, and the impact of European and U.S. winter contrasts, the spread between Brent and WTI crude oil is expected to continue strong, and once again exceeded $20/bbl. Of course, there are also risk factors here, mainly in the European economy: If the European debt crisis continues to deteriorate, will undoubtedly affect the Brent crude oil market investment confidence, and the current US economic situation is relatively good, which support the WTI oil prices. Therefore, in the long run, Brent and WTI's spreads are expected to return. It is only that the inflection point has not yet arrived. It is worthwhile to return to what level is worth discussing and studying.