US Barrels Gain Traction as Global Price Indicators
Minneapolis, MN | December 19, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC
With US crude oil contributing to the Brent price-setting formula and USGC exports balancing the market, trends in USGC balances have been valuable indicators of global market strength.
Three Things
Exports over the last year have balanced the USGC crude oil market because it has been uneconomic to carry barrels in storage, and US barrels are in demand on the international market.
As such, it has become increasingly necessary to watch USGC balances to see how export trends affect global markets. The market is more complex than a simple regression can measure, but it is clear that US barrels are impacting Brent.
Brent’s premium to WTI is eroding, and the market structure is softening. Storage may become the balancing item again if Brent prices don’t recover in the coming weeks.
The US Gulf Coast is well recognized for its importance in global crude and product markets as a major center of refining capacity and, of course, an influential contributor to global crude oil production. As a rough demonstration of the US oil market’s influence in global markets, consider that over the last three years, the rolling 90-trading-day correlation of daily changes in price between Brent and WTI has averaged about 0.92 r^2, at times reaching 0.98. As far as crude oil goes, this is almost entirely a story about the USGC because of the productive power of the region. In other words, crude oil export availability is the driving factor in setting global crude oil prices.
*This summary is based off December 10, 2023
A free excerpt, such as this one, will be published on a delay periodically. This is an excerpt from Blue Lacy Advisors, LLC's (“Blue Lacy”) weekly commentary for clients, which is based on a collection of models, research/analytical subscriptions, and bespoke work. Each week Blue Lacy explores how market drivers included in these analyses might affect or be used in clients' planning, budgeting, and execution of strategy. Call Blue Lacy to make an appointment today!
Meet the Author!
Email: Sinos@bluelacyllc.com
Phone: +1-832-413-3124
Website: www.bluelacyllc.com
Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.
He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.
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