US Crude Outlook – U.S. grades likely weaker on arb

* US grades weaken on narrower Brent/WTI spread

* European refinery strike could divert crude to US

NEW YORK, Oct 25 (BestGrowthStock) – U.S. cash crude differentials
are likely to weaken starting on Tuesday when the December
grades become prompt as the Brent/WTI spread narrows further,
traders and brokers said on Monday.

Cash crude trading moves to December delivery on Tuesday
after Monday’s monthly pipeline booking deadline for November
grades.

“Also having a bearing on domestic grades will be the
ongoing strike in France,” said one broker.

He said that as long as the French ports remain closed both
sweet and sour crudes could get diverted to the United States
in the short term although they might be drawn to other
European refineries which are enjoying a margin surge.

Workers at three of the 12 French striking refineries have
voted to lift blockades and restart operations after some
requests were met.[ID:nWEA4157] But European sources expect
the restart of those plants to be slow. [ID:nLDE901Z3]

Strikes at French oil hubs began on Sept. 27 as workers
sought changes to pension laws. On Monday, 13 oil tankers were
banned from entering the northern French port of Le Havre.
[ID:nNWEA4175]

Brent crude futures held a premium to WTI futures, but the
spread — known as the “arb” in the trade — was seen moving
up, holding at $1.15 at midday Monday from $1.27 on Thursday.
(CL-LCO1=R: ).

On futures markets, December WTI (CLZ0: ) rose 21 cents to
$81.92 barrel at midday while the dollar was flat against the
Euro at about $1.3972. (FOREX: ).

Traders said that the futures benchmarks, against which
cash crudes are priced, are too high. So there is no need for
refiners to rush into buying cash crude for November yet and
they found it better to wait and hope for lower outrights.

“This week will be slow,” said a trader. “

Cash prices were mostly flat but LLS was seen pegged at
$1.40 a barrel over the November NYMEX sweet crude screen, in
range with Friday’s level.

Weaker front-month WTI against either second-month WTI or
the North Sea benchmark tends to strengthen grades, which
deliver against second-month WTI and compete with imports
priced in relation to Brent.

Crack spreads and therefore refining margins have weakened
in recent days as NYMEX WTI has soared, raising crude feed
costs. Reuters generic heating oil crack (CL-HO-R: ) Monday
midday stood at $13.03, down from $13.61 Friday. Reuters
generic gasoline crack (RB-CL1=R: ) stood at $4.04, down from
$4.58.

Several key U.S. refineries are getting ready to return
from planned work, which is likely to to have traders looking
for crude feedstocks.

ConocoPhillips’ 238,000 barrel per day Bayway refinery in
Linden, New Jersey could delay early November restart after a
transformer fire early Monday morning caused a plantwide power
outage, trade sources speculated on Monday. [ID:nN25258115]

US Crude Outlook – U.S. grades likely weaker on arb