Oil Futures Diverge to End Volatile Trading Week


   
Karim Bastati
DTN Analyst

   VIENNA (DTN) -- Oil futures were mixed Friday (9/18) morning, with Brent 
crude edging lower on easing supply concerns around Saudi crude oil exports, 
while WTI and ULSD futures moved higher. After a volatile and turbulent trading 
week, most contracts were eyeing small weekly gains.

   By 10:00am ET, ICE Brent for November delivery was down $0.16 to trade near 
$104.66 bbl, while NYMEX WTI for October delivery advanced $1.04 to $102.95 bbl.

   Downstream, NYMEX ULSD for October delivery rose $0.0543 to $5.1682 gallon, 
while front-month RBOB futures retreated $0.0258 to $3.4815 gallon.

   The US dollar index strengthened by 0.235 points to 100.22 against a basket 
of foreign currencies.

   Supply concerns sparked by last weekend's shutdown of Saudi Arabia's 7 
million bpd capacity East-West pipeline eased throughout the week as the 
kingdom sought to reassure buyers that it will offer additional cargoes via 
alternative routes. Reports that the pipeline can soon restart at half capacity 
also weighed on oil prices. Saudi Aramco reportedly suspending term contracts 
to Europe next month, however, dampened these bearish effects.

   The WTI contract for October delivery, meanwhile, continued to diverge from 
Brent futures on its penultimate trading day, leading the spread between the 
two crude benchmarks to plummet to $1.5 bbl in early morning trade, its lowest 
since May.

   A similar story played out with ULSD futures, reflecting the outsized impact 
the Hormuz supply disruption has had on refined fuels compared to crude oil. 
While crude oil flows through the now porous blockade have risen from war-time 
lows, fuel exports from the Persian Gulf, lacking alternative outlets and 
stymied by damages to refineries in the region, remained depressed at around a 
quarter of pre-war levels.

   The resulting divergence in crude oil and product prices, especially for 
fuels from the middle of the barrel, has since mid-June put ULSD cracks on a 
precipitous rise dwarfing the one in 2022 in both size and duration, with the 
differential on Wednesday (9/16) soaring to an all-time high $117.923 bbl.

   This continued to incentivize refiners to run as hard as possible and defer 
non-essential maintenance. U.S. Energy Information Administration data 
published this week showed unusually high refining activity for this time of 
year, with domestic refiners last week utilizing nearly 97% of operable 
capacity, compared to the 90-92% range typical for this time of year.

    




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