Afternoon Market Overview

Oil prices increased across the board last week leading into this week’s very important OPEC meeting on Thursday. WTI received an added boost over Brent with the 590,000 bpd Keystone pipeline still shut with no restart date yet announced. Last week both WTI crude oil and the spot Brent contract increased modestly with WTI leading the way lower.

The January Brent/WTI spread narrowed strongly last week with Brent now trading at only a modest premium to WTI and at the lowest premium since the second half of August of this year. The January 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 December WTI contract increased on the week and moved into a new higher technical trading range. The January Brent contract increased less than WTI resulting in the January Brent/WTI contract narrowing by $1.10/bbl to $4.91/bbl by the end of the week. The January Brent/WTI spread moved into a new lower technical trading range last week. It remains to be seen if the spread will continue to narrow once the Keystone people restarts. The HO and RBOB crack spreads were lower versus WTI for the week. The RBOB and ULSD crack spreads depreciated versus WTI. The widely followed 3-2-1 crack spread narrowed last week driven by the ULSD component.

The January WTI contract increased $2.24/bbl or 3.95 percent as total US crude oil stocks decreased within the market expectation for a draw. The spot January Brent contract increased by 1.82 percent or $1.14/bbl. On the distillate fuel front the December Nymex HO contract increased for the week by 0.32 percent or $0.0117/gal even as distillate fuel inventories increased versus the market expectations for a draw. Gasoline prices increased after gasoline inventories increased on the week. The December Nymex gasoline price increased by 2.48 percent or $0.0433/gal this past week.