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The US oil export to Europe has become profitable

The US oil export to Europe has become profitable

The US oil export to Europe has become profitable
July 22
16:00 2016

The spread between Brent and WTI quotations indicates growth. This fact, together with reduced freight rates, made export of the United States oil to Europe profitable. According to freight brokers, traders are renting tankers in order to supply raw materials overseas.

Trading companies were deprived of this possibility in recent months due to the fact that the global oil market was oversupplied and because of the unfavorable supply terms. According to Reuters, in the last two months Brent futures premium to WTI did not exceed $ 1, making the supply of the US oil to Europe unprofitable. Today, when the situation has changed, traders are renting tankers in preparation for deliveries to Europe.

Stefanos Kazanis, the freight market specialist of the consulting company McQuilling, shared with Bloomberg his forecasts regarding the growth of the WTI-Brent spread. According to the expert, the WTI-Brent spread will favorably influence the increase in oil supplies from the US to refineries in Europe, Venezuela and, probably, Asia in the short term. As a result, it becomes possible to supply American raw materials to the Old World, which can be limited, according to Reuters. The Viennese analyst firm JBC Energy in the interview with Bloomberg predicted that exports of American raw materials to Europe would increase.

As freight brokers reported to Reuters, the interest in renting the Aframax tankers has increased. These tankers can carry approximately seven hundred thousand barrels of oil. The agency notes that this indicates that trading companies are going to export oil. “In the long term we expect a stable and slight spread of WTI-Brent on the background of the US oil return to a level of previous years. Before this happens, we can expect an increase in the number of arbitrage transactions”, – reported David Amand, the founder of the analytical firm Navigistics Consulting, which specializes in marine consulting.

Usually, traders sell “black gold” on the market, where it has the highest price. Thus, they take advantage of the price difference at different markets and the timing of deliveries. Such transactions are traditionally called arbitrage transactions. Several traders told Bloomberg, that arbitration was profitable at that time. However, other traders say that, despite the improvement of market conditions, they are not going to make deals. According to the agency, in July the traders chartered tankers to export oil from the Gulf of Mexico to Europe. WTI crude oil is the first in the queue for delivery to Europe as well as a variety of raw material from the fields of the Eagle Ford and Texas / Oklahoma, reported traders to Bloomberg.

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