Afternoon Market Overview

Oil prices were higher across the board for the week ending Dec 29 with ULSD contract leading the complex higher. Last week both WTI crude oil and the spot Brent contract were higher with WTI increasing modestly more than Brent as the Forties pipeline system started to return to normal operation.

The February Brent/WTI spread narrowed strongly last week but with Brent still trading at a strong premium to WTI. The February Brent premium to WTI remains wide enough to keep the arb window open for select US crudes to work into the export market. The spot February WTI contract increased on the week and has moved into a new higher technical trading range. The February Brent contract increased less than the February WTI contract resulting in the February Brent/WTI contract narrowing by $0.60/bbl to $6.18/bbl by the end of the week. The February Brent/WTI spread remained in its current technical trading range last week. The HO and RBOB crack spreads were mixed versus WTI for the week.

The RBOB contract depreciated while the ULSD/HO contracted appreciated on the week against a backdrop of very cold temperatures across the USEC. The widely followed 3-2-1 crack spread widened last week driven by the ULSD component. The February WTI contract increased $1.95/bbl or 3.34 percent as total US crude oil stocks decreased more than the market expectations. The spot February Brent contract increased by 2.07 percent or $1.35/bbl.

On the distillate fuel front the January Nymex HO contract increased for the week by 5.39 percent or $0.1061/gal even as cold weather was the main price direction catalyst. Gasoline prices increased even after gasoline inventories increased on the week. The February Nymex gasoline price increased by 2.09 percent or $0.0369/gal this past week.