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The
monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil continued
lower in April, retreating by $0.98 (1.1 percent) to $92.07 per barrel. That drop
occurred concurrently with a slightly weaker dollar, the lagged impacts of virtually
unchanged consumption levels -- at 18.6 million barrels per day (BPD) in
February, and a continued build-up in crude stocks.
The
monthly average price spread between Brent crude (the predominant grade used in
Europe ) and WTI shrank in March by over 25 percent, to $15.42
per barrel -- the smallest differential since July 2012. Brent and WTI prices
had been essentially identical until the end of 2010.
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Not
only have crude inventories apparently risen to a new, all-time
high (exceeding the record set back in July 1990), but growth in fuel demand
has either stalled or actually contracted (see this
and this).
Much like many economists consider electricity consumption data the preferred barometer of Chinese
economic activity, we suspect fuel usage may be a better indicator of the true state
of the U.S. GDP figures. If so, the U.S.
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In
any event, futures traders apparently don’t see demand increasing during the
next couple of years. Futures prices are in backwardation (i.e., subsequent
contract dates are priced lower than their predecessors), and prices for each
contract ended below the average for the data collection period.
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.
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