Crude oil investments rise on benchmark spread speculation
Crude oil prices rose to their highest levels in more than three months today on the commodity index, as investors sold off their stakes in Brent crude and bought into its U.S. counterpart in order to reap the benefits of the plunging spread between the two benchmarks. The sector shrugged off reports that crude oil stockpiles in the U.S. shifted their downward trend and posted increases this week, as oil investments rallied up the charts. Brent crude oil futures suffered further losses when a meeting between Europe’s finance ministers was cancelled due to discord between the nations of the euro zone. The meeting was scheduled to precede the final summit of the region’s leaders, during which a long term debt crisis resolution plan is to be unveiled. The summit is slated to take place today.
Crude oil futures in the U.S. razed their losses for the year on the strength of the spread rally, increasing almost 4% on the commodity index. The margin between Brent and West Texas Intermediate is at its lowest levels since July, and with the European commodity oil still sitting comfortably above the resistant $110 mark, it could get narrower still, causing another surge in oil investments.
The oil commodity futures for delivery in December rose almost $2 to settle at $93.16 per barrel in electronic trading on the New York Mercantile Exchange. The American commodity oil has managed to soar more than 24% in less than a month, paring down its considerable losses for the year, and creating a bull market along the way.
Brent crude oil prices fell 96 cents and now sit at $110.49 per barrel in London. The backwardation occurring on the markets at the moment signifies that a rise in demand is taking place, leading both economists and investors believe that WTI crude oil index may hit as high as $105 per barrel before the year wraps up.
All eyes in the sector remain in Europe. If the region manages to produce an apt resolution plan for its deteriorating debt situation, crude oil futures across the globe should see a strong surge along with oil investments.