LONDON (Commodity Online): The divergent performance between Brent and WTI carried through on Tuesday, with December Brent expiring 50 cents higher at $112.39/bbl and December WTI gaining $1.23 to $99.37/bbl, said Barclays Capital in a snippet.
The oil market remains caught between two competing and intensifying influences. Outside the oil market, the probability of a major economic policy failure and associated economic discontinuities has grown. Likewise, within the oil market, spare capacity has eroded and physical market strength has grown following a large supply deficit in Q3.
Indeed, with low spare capacity, falling inventories, and an existing large supply deficit, in Bank’s view, it is only the fear of macroeconomic discontinuities that is keeping a lid on oil prices.
“Without that fear, we believe that Brent would have already reached an alltime high and climbed past $150 per barrel in an attempt to ease tightness by rationing the demand side of the market. Simultaneously, there has been a series of new or enhanced geopolitical risks for the oil market, as a result of which, we consider the current price equilibrium to be a potentially unstable one,” Bank added.
According to Barclays, in terms of price differentials, WTI continues to play catch-up to other global crude benchmarks, and given the ample storage facility and available storage at Cushing, this trend is likely to continue.
