March 2014 – Brent vs. WTI Forward Curve Analysis with ZEMA


NYMEX Crude Forward Curve (Mar. 2014)

On the New York Mercantile Exchange (NYMEX), crude oil futures dropped by $1 USD/Bbl in March 2014 when compared to last month for Brent and Western Texas Intermediate (WTI). The NYMEX Brent forward curve in March (represented by the blue line in the graph above) was traded at $103 USD/Bbl, while the previous month (blue points) settled at around $104 USD/Bbl for delivery by the end of 2015. For the same period, NYMEX WTI forward contracts in March (red line) fell to $92 USD/Bbl, whereas the previous month (red points) averaged around $93 USD/Bbl. This drop of $1 USD/Bbl for both benchmarks kept the Brent-WTI spread (the area in light blue) around $11 USD/Bbl until the end of 2015.

Brent and WTI dropped based on speculation that U.S. and European sanctions against Russia are unlikely to disrupt the crude oil market. U.S. President Barack Obama imposed penalties on top Russian officials for supporting the secession of Crimea from the Ukraine after 97% of voters in Crimea chose to become part of Russia. Brent, which is more sensitive to changes in the global supply-and-demand balance, had 22% lower trading volumes (the lowest since February 4) than the 100-day average.1 At this stage, the market is more affected by tepid global demand than by the anticipation of a major disruption.China refined the least crude in four months, highlighting concerns about the Chinese appetite for petroleum products.2Also, OPEC cut crude exports to the lowest level since November as a result of slowed refinery demand in Europe and North America, according to tanker-tracker Oil Movements.2


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