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The
monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil shot
higher in July, rising by $10.81 (11.5 percent) to $104.61 per barrel. That price
increase coincided with a falloff in crude stocks, but occurred despite a
modest strengthening of the dollar and the lagged impacts of still-tepid consumption
levels -- including a drop of 2,000 barrels per day (BPD) to 18.6 million BPD in
May. The Federal Reserve Open Market Committee’s failure to provide a timetable
for scaling back its quantitative easing policy likely
also contributed to the price rise.
The
monthly average price spread between Brent crude (the predominant grade used in
Europe ) and WTI expanded in June by over 17 percent, to $9.12
per barrel; Brent and WTI prices were essentially identical until the end of
2010.
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We
believe that a combination of geopolitical tensions and the effects of monetary
policies being implemented by central bank (resulting in what Charles
Hugh Smith terms “the financialization of commodities”) pushed futures
prices higher during the past month.
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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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