Wednesday, July 13, 2011

The IEA Justifies Oil Hasn't Lowered The Price

Marker crude prices fell by $5/bbl immediately after the action was announced. Since then Brent futures have  oscillated  between  $105‐$119/bbl,  and  WTI  between  $91‐$99/bbl.  At  writing,  flat  prices  of $116/bbl  (Brent)  and  $95/bbl  (WTI)  are  close  to  those  seen  immediately  prior  to  the  action,  but  will  doubtless  fluctuate  further  in  the  weeks  ahead.  However,  it  is  blinkered  to  focus  on  specific price  levels,  which  were  never  the  rationale  for  the  action.  Narrower  sweet‐sour  spreads,  modestly  stronger  refining  margins  and  an  easing  of  the  steep  backwardation  evident  before  the  release  on  the  other  hand all suggest a more benevolent market reaction. We acknowledge that the impact of the collective action will  only  be  truly  evident  in  hindsight. However, recognising  the  flexibility  and  market  liquidity  it  has  already  provided, we take a resolutely positive view so