October 2012 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil slipped lower in September, retreating by $5.15 (-5.4 percent) to $89.57 per barrel. That rise was concurrent with an up-swell of crude stocks, but occurred despite a slight weakening of the dollar and the lagged impacts of a jump in consumption of 625,000 barrels per day (BPD) -- to 19.2 million BPD -- during August.

The price spread between Brent crude (the predominant grade used in Europe) and WTI shrank in September (October Brent data was not yet available when this was written), to $18.14 per barrel. Brent and WTI prices had been essentially identical until the end of 2010.
 

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Data from the American Petroleum Institute (APA) indicates the August jump in consumption was more than reversed in September. API said that, for September, petroleum deliveries -- a key indicator of market demand -- fell to 18.2 million BPD, a 3.8 percent decline compared to last year and the second-lowest level for the month since 1996. "The September demand numbers indicate there's still substantial weakness in the economy," said API chief economist John Felmy. "While manufacturing and employment have improved some, we've yet to see strong momentum developing."

Although the oil futures price pattern suggests traders expect tight crude supplies through 3Q2013, it also appears the impact of that shortfall is waning. The decline in each contract’s price seems to support John Felmy’s contention about the weak economy.
 

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As part of a broader perspective of recent events, the world stopped getting warmer almost 16 years ago, according to new data released by the U.K.’s Met Office in mid-October. The figures, which have triggered debate among climate scientists, reveal that from the beginning of 1997 until August 2012, there was no discernible rise in aggregate global temperatures. Moreover, although Artic sea ice has been thinning during recent summers, Antarctic sea ice is arguably the thickest it has been in a decade. Hence, if the Met Office’s finding is indeed true, it is possible that the Arctic ice thinning trend may be reversed, and Antarctic ice could accumulate even more quickly.


The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.