Brent and NYMEX

I've just noticed that the Brent (London) and NYMEX (New York) prices for crude oil have converged and are hovering around $67 per barrel nowadays. That's a recent trend, and interesting.

Resource Investor has also noted that :

The Europeans are sucking up Brent crude of that there is no mistake. The normal gap between Brent and the WTI has evaporated as European natural gas prices have forced a switch back to oil for some power generators. That is the same as $110 oil. Plus Europe's refiners are back on stream and champing for product.

Brent is just 50 cents off its all time closing high and pump prices in the U.K. are closing on $2.00 a litre. But then nothing else is sitting still either. Though it has not risen as fast as Brent the NYMEX WTI is within $1.50 of its record high and the OPEC basket is now sitting over $60.

Total world spare capacity is, and has been, the underlying driver behind the market over the past few years, coupled with demand. Estimates now put the capacity cushion of the planet Earth at 1.7 million barrels, 1.5 million of which sits with OPEC, most of which is so heavy no one really wants it. The world awaits the end of the refinery bottleneck, so that more complex refineries can actually process the stuff. That is at least five and more like ten years away.

This time the market might pull back from $68.50 for WTI and $68.40 for Brent. But if something odd happens, then traders will see an opportunity and pile straight through. Now $60 is the new floor, $55 is absolutely unbreakable and if we get one more spark then stand back, it's party time. Not for you of course, you have to pay.

(2006-04-10 23:42:29 SGT) [Energy] Permalink Comments [1]

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