Oil futures move in a narrow range as Brent/WTI
spread widens
London (Platts)--8Dec2009/734 am EST/1234 GMT
Trading in crude futures markets was lackluster Tuesday morning in
Europe due to the lack of any major indicators, sources said.
However, traders were considering the implications of the increasing
spread between Brent and WTI due the climbing stocks at Cushing,
Oklahoma--home of the WTI contract's delivery point.
At 11:35 GMT, the ICE Brent January contract was down 14
cents/b from Monday's close to trade at $76.29/barrel while January
NYMEX WTI was 32 cents/b lower at $73.61/b--the Brent premium
extending to $2.68/b, 20 cents/b higher than the spread at the close
on Monday.
In addition to the spread, the WTI contango structure was a
major talking point in the market. The contango between January and
March futures stood at $3.66/b at 11:35 GMT compared with $1.79/b
for Brent January-March futures at the same time.
"To avoid some of the rolling costs, some investors might
move some of their prompt length to the back of the curve but they
are then lowering their risk/reward economics as they are buying the
back at a much higher price," Petromatrix analyst Olivier Jakob said
in a report.
There were fears that the WTI contango structure may have
reached a stage in which it will be moving in a vicious circle.
"Moving positions from front to back will also widen the
contango, which will then force more oil in storage which will then
force an even wider contango," Jakobs said.
Crude futures, in general, moved in a narrow range as the
market waited for the American Petroleum Institute statistics for
last week's oil stocks in the US.
"We are stuck in a range after we tested the up side of
levels close to $80/b last week, we are waiting for developments in
the financial markets and economic data," Bache Financial futures
broker Tony Machacek said.
--Walid Kurdi, walid_kurdi@platts.com