New York (Platts)--24May2007
The controversy over the continuing fall in the value of WTI relative to other international benchmarks picked up further steam Thursday, as the already wide premium that Brent is holding to WTI blew out further, and WTI spent another day less than the value of Dubai. July WTI crude on the New York Mercantile Exchange settled $1.59/barrel lower at $64.18/b, while July Brent on the IntercontinentalExchange settled 12 cents/b higher at $70.72/b, putting the July WTI-Brent spread at minus $6.54/b. The spread has been widening all week, from minus $3.44/b on May 18, as the US Midwest Cushing oil hub remains glutted with supply, while North Sea supplies have tightened. The initial blowout in the WTI-Brent spread was set in motion when Valero's 170,000 b/d McKee refinery in Sunray, Texas, went offline in February as a result of a fire. McKee is one of about 11 refineries that link into the pipeline system that feeds into Cushing, Oklahoma, home of the NYMEX delivery point. At the time, NYMEX light sweet crude futures were at a 91 cents/b premium to Brent. The McKee refinery went into partial restart April 23, but the loss of refiner demand over two months caused a backlog of barrels in the Midwest. But the new movement Thursday was driven in part by an announcement that McKee took a fluid catalytic cracker offline, and the concurrent planned maintenance at ConocoPhillips' 146,000 b/d Borger, Texas, refinery, another unit hooked into the Cushing oil system. With McKee's FCC down for about two weeks and ConocoPhillips' Borger refinery expected to be in turnaround until June 23, the lack of demand for crude barrels in the Midwest should contribute to further weakness in the WTI market. The US Energy Information Administration reported May 23 a 900,000-barrel build in Cushing inventories. At 27.357 million barrels, stocks at Cushing were just 658,000 barrels below the all-time high posted the week ending April 13, causing the front of the crude futures curve to sag. July/August settled at minus $1.45/b May 24 after settling May 23 at minus $1.25/b. Brent futures continued to be supported by reduced North Sea loadings and unrest in Nigeria. Official loading programs for North Sea grades Oseberg and Ekofisk show June volumes down by 16%. "The bullish flag on crude oil remains with the expectations of Nigerian disruptions leading to the presidential nomination next Tuesday and will keep the market on edge in front of a long Memorial Day weekend. But some disruption will need to materialize by next week to bring some stress back to the crude system," Petromatrix said in a report. Meanwhile, the collapse in WTI values against benchmark Dubai prices, following its earlier move down against Brent, is setting up an unusual crude arbitrage: North America to Asia. --staff reports This is an excerpt. For more news, request a free trial to Platts Oilgram News at http://www.platts.com/Request%20More%20Information/index.xml?src=story or subscribe now at http://www.platts.com/infostore/product_info.php?cPath=1_29&products_id=29
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