Crude oil investing stream

Also known as West Texas Intermediate WTI or Texas light sweet, it is a popular investment tool used by international investors seeking true asset class diversification in their portfolio. The commodity is often seen as a hedge against any financial uncertainty, inflation, deflation or currency devaluation.

WTI is a benchmark that serves as a reference price for sellers and buyers of crude oil across the United States. Due to its relatively low density and low sulphur content, it is generally considered lighter and sweeter than Brent , making it ideal for gasoline refining. Stay up-to-date with the latest market news and watch the US crude oil spot price live at Capital.

US crude oil is a blend of several American streams of light sweet crude oils. It is sourced from several oil fields, including those in Texas, North Dakota and Louisiana, and refined in the Midwest and Gulf Coast regions. Cushing, Oklahoma, is the major trading hub for US crude oil. Even though WTI is considered the highest-quality light sweet crude available, it is not the most used oil worldwide.

Adjusted for inflation, Brent crude oil is back below its 15 year average price. In this context, the current price is not particularly high. Also, the Brent futures curve has in fact flattened to such an extent that current time spreads would have historically corresponded with much higher inventories expressed in days of demand. Then there is still meaningful uncertainty over what will happen to oil supply from Russia once the EU import embargo kicks in later this year for crude oil, and early next year for oil products.

The EU still imports about three and a half million barrels a day of oil from Russia. Redirecting such a large volume to other buyers, and then redirecting other oil back to Europe is possible over time, but probably not without significant disruption for an extended period. For a while, we suspect that this will lead to a net loss of oil supply to the markets in the order of one and a half million barrels a day.

To attract enough other oil to Europe, European oil prices will need to stay elevated. The relative price of oil in Europe is Brent crude oil. Elsewhere, there are supply issues too. We started off the year forecasting nearly a million barrels a day of oil production growth from the United States.

But so far this year, actual growth in the first six months of the year has just been half that level. We still assume some back end loaded growth later this year, but have lowered our forecast already several times. Then Nigerian oil production has deteriorated much faster than expected, currently at the lowest level since the early s. The long term structural outlook for the oil market still remains one of tightness, but for now this is overshadowed by cyclical demand challenges.

As long as macroeconomic conditions remain so weak, oil prices will probably continue to linger on. However, that should not be taken as a sign that the structural issues in the oil market around investment and capacity are solved. As we all know, after recession comes recovery.

Once demand picks up, the structural issues will likely reassert themselves. We have lowered our near-term oil price forecast, but still see a firmer market at some point in again.

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