uploads///WTI Brent Spread

Stronger Dollar Impacted the WTI-Brent Spread



WTI-Brent spread

WTI (West Texas Intermediate) crude oil’s discount to Brent crude oil converged slightly in the week ending December 4, 2015—compared to the WTI-Brent spread on November 27. As of Friday, December 4, the differential was $3.03 per barrel. On November 27, it was $3.15 per barrel.

The spread actually widened last week. Compared to the weekly spread movements, the WTI-Brent spread was at $2.55 per barrel on December 2. It widened to $3.03 per barrel on December 4.

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Price overview

WTI crude oil prices were almost steady. There was less volatility from November 27 to December 1. However, Brent crude oil prices were negatively impacted by more OPEC output in November. So, the WTI-Brent spread converged until December 2. It settled at $2.55 per barrel on December 2.

After the EIA’s (U.S Energy Information Administration) inventory report, WTI fell more than Brent due to higher-than-expected inventory builds. This caused the spread to widen. It settled at $2.76 per barrel on December 3.

On December 4, the WTI-Brent spread widened more to $3.03 per barrel. It widened due to the stronger dollar. The dollar was strong because of positive job data and OPEC’s (Organization of the Petroleum Exporting Countries) decision not to cut the production rate. A disagreement between the members caused the WTI prices to fall more than the Brent prices. This made the spread wider.

Impact on domestic oil producers

A wider WTI-Brent spread is negative for domestic oil producers. In contrast, a narrow spread is positive for US oil producers. A narrow spread allows US producers to receive the same money that international producers receive for their produced products. The spread impacts US domestic crude oil producers’ revenue like Occidental Petroleum (OXY), Anadarko Petroleum (APC), Apache (APA), ConocoPhillips (COP), and Cimarex Energy (XEC).

Apache (APA) accounts for 2.6% of the PowerShares Dynamic Market Portfolio ETF (PWC).


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