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Brent and WTI Crude Oil Prices Diverge

Gordon Kristopher - Author
By

Nov. 20 2020, Updated 2:44 p.m. ET

Crude oil prices  

December WTI (West Texas Intermediate) crude oil futures contracts fell marginally by 0.52% and closed at $40.54 per barrel on Thursday, November 19, 2015. Prices fell due to oversupply concerns ahead of the December contracts’ expiry. The US benchmark following ETFs like the United States Oil ETF (USO) and the ProShares Ultra DJ-UBS Crude Oil ETF (UCO) mirrored the price trajectory of crude oil prices. These ETFs fell by 0.69% and 1.2%, respectively, on November 19, 2015.

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Brent and WTI 

The global benchmark Brent crude oil rose slightly by 0.09% and settled at $44.18 per barrel. The spread between WTI and Brent was at $3.64 per barrel. Brent and WTI crude oil prices diverged in yesterday’s trade. The expiry of the December WTI crude oil futures contracts led to a rise in the rollover. The January 2016 WTI contracts’ volume rose during trade on November 19, 2015. WTI December futures contracts will expire on November 20, 2015. WTI oil prices also fell due to rising US crude oil stocks. US crude oil stocks rose for the eighth week in the oversupplied market. To learn more about the inventory, visit the next part of the series.

Saudi Arabia and Russia’s production 

Russia and Saudi Arabia are major crude oil exporting giants. Russia and Saudi Arabia produced more than 10 MMbpd (million barrels per day) of crude oil in October 2015 despite a 60% fall in crude oil prices since June 2014. The record oil production and record global inventory are weighing on crude oil prices. The collateral damage of crude oil prices impacts energy giants’ margins like Total (TOT), Eni (ENI), BP (BP), and Shell (RDS.A). However, improving refining demand in the US and Saudi Arabia, despite the winter maintenance season, is helping oil’s demand side.

Volatility 

The contango crude oil market suggests that oil prices will likely rise over the long term. The December 2015 and January 2016 WTI spread hits $1.4 per barrel—the widest in the last seven months. The December 2015 and December 2016 WTI futures spread hit a record of $8 per barrel. However, it was the sixth down day for crude oil prices in the last ten days. Prices fell by 1.80% more on the average down days than on the average up days. WTI crude oil was the average performer in yesterday’s trade. Crude oil prices fell 23.5% YTD (year-to-date) due to oversupply concerns. The uncertainty in the oil market impacts ETFs like the iShares US Oil Equipment & Services ETF (IEZ) and the Fidelity MSCI Energy (FENY).

In this series, we’ll look at crude oil prices and fundamentals. For an in-depth fundamental look at oil and gas and related companies, sectors, and drivers, visit Market Realist’s Energy and Power page.

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