Chart of the Day: Crude divergence

Today’s chart plots the CRB Index, a weighted basket of 19 commodities, against the two major crude oil products, West Texas Intermediate (WTI) and ICE Brent Crude.

The horizontal orange line was the support area for the CRB during the minor correction throughout the 2006-07 lows, before the large bubble in commodity prices through 2008, where it crashed through to a new decade low.

Recently, from the 2009 low, the CRB climbed back up to this now resistance line, and was only pushed over by the QE2 program by the US Federal Reserve. It is now reverting back to this mean as stimulus turns to austerity across the developed world.

What is even more interesting is the divergence of crude prices from the CRB Index, and particular the ICE Brent Crude. Whilst the WTI Crude price has followed the CRB, in recent weeks it has put on a rally, and is now trying to catch up to Brent Crude, which did not suffer much of a correction at all.

Are speculators loading up on positions trying to pre-empt a QE3 announcement?

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Comments

  1. Peak oil supply/demand means that demand is bumping against supply.

    Recent ME tensions with regards to Iran seems as though we will have further price strength with the potential ongoing supply issues.

    Libya isn’t a big supplier in the scheme of things, however their light sweet crude going off-line had a large impact on price.

    WTI isn’t relevant these days. Brent crude is the real price. With economic weakness, we should have had Brent prices fall, yet they have remained stubbornly high.

    Regardless of perceptions of further QE (which seems to be ongoing behind the scenes anyway), this seems to be more akin to supply issues and the risk of further supply constraints brought upon us by tension in the Middle East.

    • Readers: do you want me to add ICE Brent crude price (which I believe also influences the TAPIS price for Aussie petrol prices?) alongside WTI crude on my Trading Day summary?

      • That depends, is there a better correlation between Tapis and Brent? I thought WTI was the biggest market and thus most likely to influence.

  2. Interestingly, inventories of petroleum products in the US have generally been weak in recent months. This suggests that demand is being supported by emerging market consumption, while supply constraints are also most likely helping buoy prices.

  3. Diogenes the CynicMEMBER

    This is real supply and demand dynamics. Peak Oil is going to become a more mainstream topic in the near future.

    War with Iran would see the price spike much higher.

  4. I am less convinced it is supply and demand dynamics at present. This OPEC note forecasts surplus of oil refining surplus of 10m bpd by 2015. Also forecasts average price $75-85 over the remainder of the decade. Opec put the current increase on ‘speculators’ which may be about right.
    http://www.hellenicshippingnews.com/index.php?option=com_content&view=article&id=57221:opec-sees-oil-refining-surplus-at-10m-bpd-by-2015-&catid=31:general-energy-news&Itemid=94

    Anyway, “what if”: price were to stabilise around USD85 with upward speculator fluctuation and AUD declines the 30 or even 40% many think it is overvalued by – how would this filter through the economy?

  5. Asian growth is the driver. (30% and rising.) Lack of refinery capacity in Asia compared to Asian demand combined with excess refinery capacity elsewhere is creating arbitrage for refineries competing into the Asian capacity shortfall.

  6. “3d1k
    November 11, 2011 at 11:37 am

    I am less convinced it is supply and demand dynamics at present. This OPEC note forecasts surplus of oil refining surplus of 10m bpd by 2015……”

    OPEC are hardly an independent source of analysis, 3d1k. If you are interested, these guys do good stuff on the energy market, among other things, especially the US macro economy

    http://www.econbrowser.com/