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17 Sep 2013
Easing Syria tensions triggers oil declines, but look to the Brent-WTI spread on any supply fears
FXstreet.com (London) - Oil prices have continued to slide as Syrian tensions ease. West Texas Intermediate has continued three-day falls, with WTI October delivery dropping to an intra day low at $105.59.
As US, UK and French diplomats push for a UN resolution on Syria, fears over supply disruptions resulting from a military conflict have waned.
But despite downside following easing fears, Brent October contracts are still trading at a premium to WTI, or Nymex, contracts. Topping at $116.09/barrel, the Brent price shows the European contracts trading at a premium over US WTI crude, attributed to increasing US output in the face of Middle Eastern supply disruption risks.
At the beginning of September, US oil output reached 7.75 million barrels a day, the highest in 24 years.
The WTI-Brent spread was at its widest in 2011, when huge oversupply collapsed WTI prices. But the stabilising of the Syrian tensions can be viewed as fragile, and any breakdown in diplomatic channels could lead to a sharp widening of the spread on supply fears.
With dollar-denominated oil contracts at the mercy of Fed decisions this week, oil bulls may look at the spread differential in a currency-neutral play on supply fears, taking a short WTI position against a long Brent to gain on any Brent jump and strip out dollar concerns.
As US, UK and French diplomats push for a UN resolution on Syria, fears over supply disruptions resulting from a military conflict have waned.
But despite downside following easing fears, Brent October contracts are still trading at a premium to WTI, or Nymex, contracts. Topping at $116.09/barrel, the Brent price shows the European contracts trading at a premium over US WTI crude, attributed to increasing US output in the face of Middle Eastern supply disruption risks.
At the beginning of September, US oil output reached 7.75 million barrels a day, the highest in 24 years.
The WTI-Brent spread was at its widest in 2011, when huge oversupply collapsed WTI prices. But the stabilising of the Syrian tensions can be viewed as fragile, and any breakdown in diplomatic channels could lead to a sharp widening of the spread on supply fears.
With dollar-denominated oil contracts at the mercy of Fed decisions this week, oil bulls may look at the spread differential in a currency-neutral play on supply fears, taking a short WTI position against a long Brent to gain on any Brent jump and strip out dollar concerns.