"The spread is dead," Global Hunter proclaims, as WTI crude (USO) rises above Brent (BNO) for...


"The spread is dead," Global Hunter proclaims, as WTI crude (USO) rises above Brent (BNO) for the first time in nearly three years two days after the EIA reported a third consecutive weekly supply decline. Some analysts say a WTI premium may be here to stay, supported by a relatively better outlook for the U.S. economy and falling stockpiles. Brent meanwhile, may struggle amid receding geopolitical risks and global macroeconomic weakness. Refiners: ALDW -0.34%, CVI -0.22%, TSO +1.64%, HFC + 3.29%, MPC +1.32%, NTI -0.41%, DK +3.36%.

From other sites
Comments (17)
  • bigbenorr
    , contributor
    Comments (1156) | Send Message
     
    Nooooooooooo!!
    19 Jul 2013, 02:09 PM Reply Like
  • wigit5
    , contributor
    Comments (4365) | Send Message
     
    Time to sell $PSX?
    19 Jul 2013, 02:23 PM Reply Like
  • Pinkrabbit
    , contributor
    Comments (198) | Send Message
     
    No clear to me why that impacts US refiners other than the price for WTI is going up and that may narrow their margins. A little education please from the peanut gallery. Having trouble understanding why the narrowing Brent - WTI spread harms refiners.
    19 Jul 2013, 02:38 PM Reply Like
  • bigbenorr
    , contributor
    Comments (1156) | Send Message
     
    From my understanding it mainly harms those refineries closest to the (until recently) cheaper inland sources of WTI crude, as opposed to the coastal states where transportation issues had forced them to use higher priced Brent (or equivalent). either way gasoline still sells for the same price so the inland refiners were essentially buying low, selling high, and pocketing the difference. I still can't figure out why HFC is up today though.....
    19 Jul 2013, 02:57 PM Reply Like
  • boblogan
    , contributor
    Comments (2) | Send Message
     
    It just raises the cost of their production, just like any other industry. So now when they charge $4.50 / gallon in Chicago, they're paying more for theirprimary indegredient.
    19 Jul 2013, 04:47 PM Reply Like
  • Pinkrabbit
    , contributor
    Comments (198) | Send Message
     
    I did a little digging and found this article:

     

    "Exports have continued to rise in 2013. In March the U.S. shipped out a record 3.2 million barrels a day of refined fuel. “The tools are in place for the U.S. to become an even bigger exporter of gasoline and diesel,” says Stephen Schork, president of the Pennsylvania energy consulting firm Schork Group. “The U.S. has the most sophisticated network and the most technologically advanced refining system in the world, and it has access to a tremendous amount of domestically produced crude oil in a country where demand is stagnant at best.”

     

    Despite the added costs of transport, U.S. refiners retain a price advantage over their foreign competitors in Europe and Latin America, since U.S. crude is still cheaper than most foreign benchmark blends. This has led to healthy profits for some of the nation’s largest refiners. Shares of Marathon Petroleum (MPC) and Phillips 66 (PSX) hit records in January after earnings beat estimates. Now those lucrative margins have come under pressure as fuel makers run headlong into a biofuel mandate that has become tougher and more expensive to meet."

     

    I guess that now that the spread is narrowing or eliminated, the US will loose that cost advantage that will impact exports and profits.
    20 Jul 2013, 10:57 AM Reply Like
  • Michael Fitzsimmons
    , contributor
    Comments (11029) | Send Message
     
    Yet WCS is still trading at a ~$15/barrel discount to WTI. So those refiners, like PSX, that import a considerable amount of WCS and can grow exports to avoid the RIN tax should be able to do ok.
    19 Jul 2013, 02:54 PM Reply Like
  • bigbenorr
    , contributor
    Comments (1156) | Send Message
     
    Where do you find WCS pricing? Are you saying that it is trading in the $90-$95 range? If so that should be a huge boon to Canadian producers.
    19 Jul 2013, 04:18 PM Reply Like
  • bgold1955
    , contributor
    Comments (2350) | Send Message
     
    VLO & HFC are soaring today so even though they claim pressure due to WTI....... refiners climb. Sometimes, regardless the news, momentum cannot be beaten, e,g., GOOG.
    19 Jul 2013, 03:59 PM Reply Like
  • Ruffdog
    , contributor
    Comments (3435) | Send Message
     
    If the crack spread shrinks, just raise the price at the pump, no problem.
    19 Jul 2013, 04:36 PM Reply Like
  • snugbub
    , contributor
    Comments (7) | Send Message
     
    I don't understand, does this hurt or help ALDW ??
    19 Jul 2013, 05:26 PM Reply Like
  • Pinkrabbit
    , contributor
    Comments (198) | Send Message
     
    Your not alone. I can only see it hurt gas exports when they have to compete with Brent. Not even sure if ALDW. CVRR or NTI even export gas. I think we all agree they can raise the price at the pump to maintain the same margins. So what is the deal? Does anyone really have a grasp on this? My only concern about having MLP's is tax issues. I have a number of articles that left my head spinning. I hope to hell Turbo-Tax has got it covered.
    21 Jul 2013, 11:53 AM Reply Like
  • drking
    , contributor
    Comments (264) | Send Message
     
    do these analyists think the G.P.are all that dumb if crude costs more
    the price at the pump goes up spread is the same this is true
    for $NTI more so than any other refiner as they refine and do retail both i almost think they down grade a company so some one they know can make profit from it i am holding $NTI & $ALDW at least for another year or more
    19 Jul 2013, 05:59 PM Reply Like
  • timpzirbes
    , contributor
    Comments (30) | Send Message
     
    High oil prices won't last. They never do. There is too much oil out there for prices to stay high.
    19 Jul 2013, 10:08 PM Reply Like
  • Aricool
    , contributor
    Comments (6367) | Send Message
     
    The US demand is DOA, so where is the WTI going? The new FAT pipes now move WTI to the GC, so I figure LLS should be under pressure when crude distillates exports drops due to all the global refining capacity starting to ramp up big. without compensating exports, it is just moving the WTI discount problem to LLS. This should get worse as the Permian (et. al.) ramp up and dump more volume into Cushing. Sounds crazy for anyone to say the Brent/WTI spread is gone for good...
    20 Jul 2013, 01:09 AM Reply Like
  • cashewking
    , contributor
    Comments (939) | Send Message
     
    I think the fact that the US is exporting over 3 million bls per day of refined product plus the switch from Brent to domestic crude has pushed the crude prices higher. However, I can't understand how most refiners are exposed to the price increases and are not covered for the majority of their current input at much lower prices. If I owned a refiner I think I would have covered at 94 or less for this year and into at least first QTR of next year.
    20 Jul 2013, 08:53 AM Reply Like
  • William James
    , contributor
    Comments (273) | Send Message
     
    The issue is looking at each refiner and determining what the source of crude is and looking at the price differential between what they pay for the crude and how they can market it. There have been some major price differentials between different crude products (spread), which have allowed a number of refiners to buy cheap (relatively speaking) crude and sell it as a variety of refined products, taking advantage of the spread.

     

    A major source of spread has also been the difference between WCS and WTI because of bottlenecks in getting WCS from Alberta into the United States. Because those bottlenecks have eased (more rail shipping and more pipelines - but no Keystone XL yet) the spread between WCS and WTI had dropped from about 40 to 10 - 15.

     

    In my view all of these factors puts pressure on refiners because the outsize profits in the recent past have depended upon that spread.
    22 Jul 2013, 10:24 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs