Featured # Markets | 3 years ago

Traders Look at Exports Markets as U.S Crude Futures Fall

A spread between the price of U.S and European oil, alongside lower shipping costs, has traders competing to take advantage of a brief window of opportunity to ship crude oil to higher priced markets. The premium for Brent futures relative to that of U.S West Texas Intermediate crude, which rose above a $1.50 barrel on Thursday, its largest level since April and up 50 cents from the beginning of the week. European futures have traded at less than a dollar premium compared to the U.S benchmark for the past two months, closing off the opportunity to move oil profitably across the Atlantic. Traders typically move crude to markets where it can fetch a higher price, a process known as arbitrage.

Ship brokers, watching the spreading now widening, have said the appetite for Aframax tankers has picked up, the first sign that traders are positioning themselves in favor of exports. The United States lifted its ban on exporting crude in December, but the opportunities to do so have been limited as a resulting factor of poor economies and a global gut in oil. Brent futures briefly traded at approximately $3 a barrel premium compared to the WTI this year, whereas last year the spread hit nearly $13 a barrel. U.S crude futures have looked increasingly bearish, with WTI futures down 10 percent since June, settling at $44.75 a barrel on Thursday.

Swiss commodities firm, Vitol, was said to have contracted two Aframax vessels that can carry crude on “subs” this week, which is a tentative way to book a vessel for loading, according to sources. Pipeline space discounts traded on the secondary market may make exports viable because they reduce shipping oil costs to ports on the Gulf Coast. Several sources stated that the economics were still too tight to be able to make their exports work, noting the current spread favored those with committed space on certain pipelines, access to ships, or storage assets.


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