US oil imports from the North Sea and West Africa will increase due to the fast decline of global crude prices, according to energy consultant Lipow Oil Associates.
West Texas Intermediate was $2.46 per barrel lower than Brent crude on Tuesday, the smallest 13 month discount, according to ICE Futures Europe exchange. The restrictions on shipping oil to the East Coast from the Gulf of Mexico means that imports will be more attractive in comparison to domestic supplies.
Andy Lipow said, “The narrowing of the spread will attract crude from West African and the North Sea to compete with Jones Act Tankers in the US. This will further add to supply in the US, causing the Brent-WTI spread to widen to stop that flow.”
Reuters quoted Energy Management Institute senior partner, Dominick Chirichella as having said, “I think a bunch of funds are doing whatever they can because they’re on the long side and finally facing the fact that the market is bearish.”
The volatility index for oil is up 8% to 21.52, with a 22.20 intraday high, the highest from November 5.
From the beginning of June, the market’s expectation for the 30-day volatility of crude oil prices rose 56 percent.
The refineries on US East Coat processed around 1.2 million barrels daily of crude for the week to September 26, according to data from the Department of Energy. This was 7.4 percent of the nation’s total output, as reported by Bloomberg.
The West Texas Intermediate November $87 put traded 8,660 lots on the New York Mercantile Exchange, double the Monday volume.
The December $85 put traded above 7,000.
The WTI call for November put at $99 per barrel traded above 5,000 lots as the price dropped 15 cents to around 5 cents per barrel.
Near the close of the day, 4,500 lots for WTI January put at $80 per barrel were secured by traders in lot block trades.
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