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The
monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil eased
lower in July, down $2.20 to $103.95 per barrel. That price drop occurred
despite a slightly weaker U.S. dollar, the lagged impacts of a 267,000 barrel-per-day
(BPD) decrease in the amount of oil supplied in May (to 18.5 million BPD), and further
reductions in crude stocks. The monthly average price spread between Brent
crude (the predominant grade used in Europe) and WTI shrank by $2.83 in July, to
$3.18 per barrel -- the narrowest differential in a year.
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“Traders
continue to ignore the ever-growing chaos in the Middle East and the sanctions
being imposed on Russia’s oil industry,” commented ASPO-USA’s Tom
Whipple in response to the noticeable retreat in futures prices, “on the
grounds that as yet there has been no significant reduction in global oil
supplies. Instead, the markets are reacting to fundamentals such as falling
demand for gasoline, inventories, and prospects for economic growth. The ‘risk
premium’ has been wrung out of the oil markets in the last few weeks -- perhaps
prematurely.”
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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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