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Wild Ride Expected for Brent-WTI Spread

Thursday, 13 Oct 2011 | 4:56 PM ET

With November Brent Crude futures expiring in Friday’s session, traders are expecting more volatility on the spread between Brent and WTI oil futures.

Commodities Tomorrow
CNBC's Sharon Epperson discusses the day's activity in the commodities markets and looks at where oil and precious metals are likely headed tomorrow.

The spread rose to as high as $27 in Thursday’s session. Petromatrix analyst Olivier Jakob says the main trading action for the last two days has been a convergence trade on the front Brent spread and the Brent premium to West Texas Intermediate, or WTI.

He expects that spread to peak in January, when the key Dow Jones UBS Commodity index shifts some of its crude allocation from WTI To Brent. That will provide some support for Brent, which many traders see as a better gauge of international oil prices than WTI.

Front Month Nymex crude (WTI) lost $1.35 per barrel Thursday, or 1.6 percent to $84.23. Nymex floor trader Ray Carbone of Paramount Options says the pullback in oil was expected after the recent short-covering rally.

Disclaimer

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  • Patti Domm

    Patti Domm is CNBC Executive Editor, News, responsible for news coverage of the markets and economy.

  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

  • Sharon Epperson is CNBC's senior commodities and personal finance correspondent.

  • JeeYeon Park is a writer for CNBC.com. Follow her on Twitter: @JeeYeonParkCNBC

  • Rick Santelli joined CNBC Business News as an on-air editor in 1999, reporting live from the floor of the Chicago Board of Trade.

  • Senior Producer at CNBC's Breaking News Desk.

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