Afternoon Market Overview

Oil prices increased on Friday with the complex ending the week strongly higher for the fifth weekly gain out of the last six weeks. Oil prices increased across the board for the week. Last week both WTI crude oil and the spot Brent contract were higher with the Mar WTI contract increasing more than Mar Brent after another modest draw in US crude oil stocks. The March Brent/WTI spread narrowed strongly last week but with Brent still trading at a premium to WTI.

The March 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 March WTI contract increased on the week and is now in the middle of the upward linear regression trading channel. The March Brent contract increased less than the March WTI contract resulting in the March Brent/WTI contract narrowing by $0.92/bbl or 17.4 percent to $4.38/bbl by the end of the week. The March Brent/WTI spread moved into a new lower technical trading range last week.

The HO and RBOB crack spreads both appreciated versus WTI for the week even as refined product inventories increased but refinery run rates decreased. The widely followed 3-2-1 crack spread widened last week driven by the ULSD component. The March WTI contract increased $2.83/bbl or 4.47 percent as total US crude oil stocks decreased within the market expectations. The spot March Brent contract increased by 2.78 percent or $1.91/bbl.

On the distillate fuel front the February Nymex HO contract increased for the week by 3.77 percent or $0.0776/gal after a smaller than expected build in distillate fuel stocks. Gasoline prices increased even after gasoline inventories increased on the week.

The February Nymex gasoline price increased by 3.98 percent or $0.0741/gal this past week.