Nymex-Brent spread remains under $1
By Michael Kitchen, MarketWatch
LOS ANGELES (MarketWatch) — Oil extended its two-session rally Friday, adding gains in electronic trade with the help of a tick lower in the U.S. dollar.
Oil for August delivery CLQ3 -0.12% added another 14 cents, or 0.1%, to trade at $108.18 a barrel, after leaping 1.5% in Thursday’s regular New York Mercantile Exchange action.
Likewise, September Brent crude UK:LCOU3 -0.08% rose 15 cents, or 0.1%, to $108.85 a barrel.
The futures received some support from an easing U.S. dollar, with the ICE dollar index DXY -0.17% inching down to 82.767 from late Thursday’s 82.783 level. A weaker U.S. currency can discourage buying of dollar-denominated oil by making it more expensive to holders of other currencies.
Meanwhile, Thursday’s rally in the Nymex-traded West Texas Intermediate (WTI) crude well outpaced a 9-cent advance in its London-traded Brent North Sea crude rival, compressing the spread to less than $1.
The Nymex-Brent spread has been shrinking recently — at the start of the month, Brent was at a $5 premium to Nymex, while at this time in 2012, the Nymex-Brent spread was roughly $14.
Citi Futures strategist Timothy Evans said falling crude-oil supplies in the U.S. had helped Nymex WTI catch up to Brent.
“WTI is the flavor of the month, having easily eclipsed the performance of Brent crude oil in this year’s version of the ongoing popularity contest between the two major global benchmarks,” he wrote late Thursday.
Evans said that with Nymex crude “in backwardation, the holding of inventories has become costly, and so we also think there’s a good chance that the decline [in U.S. crude stockpiles] will be steeper than usual.”
Backwardation means the futures are trading below the expected spot price, implying the futures will increase in value as they approach expiration.
August gasoline RBQ3 +0.60% rallied 3 cents, or 1.1%, to $3.14 a gallon in early Friday trade after having closed flat in Thursday’s Nymex trade.
“It looks as though the poor recent price performance may have been enough to convince some traders that gasoline represents a relative bargain,” wrote Citi Futures’ Evans.
In other energy trade, August heating oil HOQ3 +0.36% added 2 cents, or 0.6%, to $3.12 a gallon, while August natural gas NGQ13 -0.11% tacked on a penny, or 0.3%, to $3.83 per million British thermal units.
