By Alan Bannister, executive director of energy
products, CME Group
Events in the Middle East strongly influence price behavior
in the Brent crude market and the recent instability in Iraq
has caused some substantial price swings.
June 12 saw a three dollar rally as news broke that, having
taken Mosul, rebels were progressing southward towards
Baghdad. As their strength became apparent the proposal of
disruption to the southern officials became real
and prices continued to rally for another five days. From
June 23 ,the 15 day series of declining prices began.
The timing of this reversal seemed premature because at this
point the crisis in Iraq was far from resolved and
fundamental traders may well have felt the higher prices were
still justified, but the technical's were clear as the series
of lower highs and lower lows began.
Baghdad did not fall, the southern oilfields were safe for
now, Libya unexpectedly announced the resumption of exports,
West African cargoes remained unsold and tight diesel margins
in Europe restrained the appetite of the refiners.
Another significant trend gaining attention is the shift of
volume in the Brent market to CME Group's Nymex Brent
Liquidity has been growing steadily since CME re-launched
Nymex Brent at the beginning of 2013, with open interest now
over 100,000 contracts and having achieved a record day of
151,235 contracts traded on July 15.
Looking to the future, the launch of the Shanghai crude oil
will dovetail with the DME Oman Crude Oil contract. Traders
with an interest in the Chinese crude markets have noted that
the Shanghai contract will open up financial and physical
arbitrage opportunities to DME Oman, which trades on CME
Group’s Globex platform.
Thus traders may find it convenient to have their Nymex WTI,
Nymex Brent and DME Oman crude oil positions together on one
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