Brent and WTI crude oil
WTI (West Texas Intermediate) crude oil futures contracts for October delivery rose by $0.59 and settled at $44.59 per barrel on Tuesday, September 15, 2015. Likewise, October Brent crude oil futures rose by $0.26 and closed at $46.63 yesterday. The US WTI and Brent differential fell to $2.04 per barrel on September 15, 2015. It’s the narrowest spread between WTI and Brent since February 2015.
US crude oil prices rose marginally due to the consensus of slowing US production and speculation of falling US crude oil stocks. In contrast, the speculation of rising supplies from Iran and the Middle East continue to drag Brent crude oil lower. However, the global crude oil market will be oversupplied in 2016. As a result, it will continue to put downward pressure on crude oil prices.
EIA’s forecast for Brent and WTI
The EIA (U.S. Energy Information Administration) released its monthly STEO (Short-Term Energy Outlook) report on September 9, 2015. The US agency estimated that US crude oil prices could average around $49 per barrel in 2015 and $54 per barrel in 2016. Likewise, it estimated that Brent crude oil prices could average around $54 per barrel in 2015 and $59 per barrel in 2016. This forecast suggests a spread of $5 per barrel.
The rise in the crude oil spreads benefits US crude oil refining companies like Marathon Petroleum (MPC), Tesoro (TSO), and Valero Energy (VLO) because they pay less than the global benchmark crude oil price. These stocks account for 7.12% of ETFs like the Select Sector SPDR Fund ETF (XLE). In contrast, a narrow spread benefits US crude oil producers. The roller coaster ride of crude oil prices also impacts oil and gas ETFs like XLE and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
Brent crude oil is the global benchmark for crude oil. It represents the receiving price of international crude oil producers. In contrast, WTI is the US benchmark for crude oil. WTI crude oil is priced at Cushing, Oklahoma—the futures contract delivery point for NYMEX crude oil. WTI is the receiving price for oil producers in the US.