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Short-Term Energy Outlook Market Prices and Uncertainty Report
Crude Oil
Prices: North Sea Brent and West Texas Intermediate (WTI) front month futurescontracts continued their recent decline in October and the first week of November as alarger-than-normal seasonal decrease in global refinery runs from August throughOctober lessened demand for crude oil. The Brent contract settled at $103.46 per barrelon November 7, a decline of $4.48 per barrel compared to October 1 (Figure 1). Thedecreases in WTI futures prices were greater compared to Brent, with the front monthWTI contract settling at $94.20 per barrel on November 7, a fall of $7.84 per barrel overthe same period.
Crude oils located in the United States showed greater price declines compared tointernational benchmarks in October and the first week of November, widening theirdifferentials to Brent. The Brent-WTI front month futures spread settled at $9.26 perbarrel on November 7, an increase of $3.36 per barrel since October 1 (Figure 2).
Unlike earlier periods since the start of 2011 when the Brent-WTI spread reached about $10 per barrel, most of the current difference between Brent and WTI prices is not due totransportation constraints from the North American Midcontinent to the U.S. GulfCoast, but rather an increase in supply of light sweet crude oil combined with lowerrefinery runs compared to a few months ago. This can be observed in the behavior ofthe Louisiana Light Sweet (LLS)-Brent spot price spread. The spread settled at -$5.63 perbarrel on November 7, only $3.63 per barrel less than the Brent-WTI spread. When theBrent-WTI spread previously reached $10 per barrel, at the beginning of April, the LLS-Brent spread was positive, indicating that the Brent-WTI differential during that timewas due to costs associated with transporting crude oil to the U.S. Gulf Coast.
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