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Thursday, January 27, 2022

NYMEX front-month crude settles up $1.43/b; Brent premium to NYMEX under $5

NYMEX August crude settled $1.43 higher at $97.99/barrel Monday on Middle East tensions and as better-than-expected manufacturing data from Europe helped boost US equities.

NYMEX’s rise outpaced ICE August Brent’s 84-cent gain to $103/b, putting ICE Brent’s premium below $5 for the first time since January 2011 and the closest the two front-month crude contracts have traded since the 10th of that month.

ICE Brent’s premium over NYMEX has steadily contracted since mid-June on the expectation of increasing refinery utilization and improved pipeline and rail transportation from the US Midcontinent.

“A big feature of last quarter’s price action within the complex was the contraction of the Brent-WTI spread,” Mike Fitzpatrick, editor-in-chief of the Kilduff Report, said in a note. “The cause, of course, is the pipeline reversals, the growth on rail deliveries of crude oil, and the restart of BP’s Whiting, Indiana refinery.”

Both crude contacts opened the US trading in higher territory after renewed geopolitical concerns, coupled with better than expected manufacturing PMI data out of Europe, created a bullish undercurrent to the market, despite an official Chinese manufacturing PMI reading that showed the sector barely escaping contraction.

Tensions between supporters and opponents of Egyptian President Mohammed Morsi flared in that country over the weekend. Protests erupted across the country, reigniting market concerns about the possibility of further contagion in the Middle East as the civil war in Syria remains on-going. Egypt’s armed forces threatened to intervene in the situation if President Morsi failed to meet the demands of the people, according to a report by AFP.

“The military in Egypt saying that they’re not going to tolerate [the situation] anymore, that headline is bearish for oil,” Tradition Energy analyst Addison Armstrong said of the relatively weaker performance of ICE Brent in afternoon US trade after the Egyptian army’s announcement.

“Certainly it injects a bit of stability in to a situation that has a lot of potential danger to it,” Armstrong said.

US equities markets climbed, carrying over a largely stronger performance in Asia and Europe overnight, after US manufacturing data came in stronger than expected in June, contributing to the bullish outlook on oil more broadly and NYMEX crude specifically.

At the 2:30 p.m. EDT (1830 GMT) NYMEX market settle, the Dow Jones Industrial Average was 0.72% higher at 15,016.7, while the Standard & Poor’s 500 had gained 0.79% to 1,618.99.

“Softer PMI figures for China and rising eurozone unemployment rates were shrugged off in favor of the uptick in eurozone PMI and US construction data that remained at a supportive level, with enough growth to keep the recovery story intact but not so much to prompt fresh worries that the Fed might withdraw support,” Citi Futures Perspective analyst Tim Evans said in a note.

NYMEX August RBOB closed up 2.23 cents at $2.7379/gal, while NYMEX August ULSD settled 1.48 cents higher at $2.8736/gal, amid the rise in crude prices.

The US Dollar Index was marginally lower at the NYMEX market settle, down 0.12% at 83.039.

Source: platts.com

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