Crude Oil: Events happened in recent weeks delayed the expected narrowing of WTI-Brent spread. First, capacity of the Seaway crude oil pipeline running from Cushing Oklahoma to the US Gulf was forced to be scaled back to 175K bpd by Enterprise after the operator expanded its capacity to 400K bpd from 150K bpd earlier in January. The reason given was "unforeseen constraints in outbound takeaway… the Jones Creek delivery point has reached maximum capacity"Another issue was the delay of the start up of BP’s Whiting, Indiana unit to July. The unit with expected capacity of 260K bpd has been closed since last November and was scheduled to commence operation in April-May.
Meanwhile, Brent crude has remained firm and has gained +4.45 since the beginning of the year. The Brent forward curve has been in backwardation since July 2012 with the front-month contract being supported by decline in non-OPEC supply shortfalls and steady growth in global demand.
Natural Gas: The DOE/EIA reported that gas inventory fell -157 bcf to 2527 bcf in the week ended February 8. Stocks were -270 bcf less than the same period last year and +348 bcf above the 5-year average of 2179 bcf. Separately, Baker Hughes reported that the number of gas rigs slipped -4 units to 421 in the week ended February 13. Oil rigs increased +7 units to 1 337 and miscellaneous rigs remained unchanged and the total number of rigs gained +3 units to 1 762. Directionally oriented combined oil, gas, and miscellaneous rigs added +9 units to 194 units while horizontal rigs dipped -4 units to 1 139 units and vertical rigs slid -2 units to 429 during the week.
Precious Metals: Despite the decline last week, PGMs continued to outperform gold and silver with platinum widening its premium to gold to above $75/oz, levels last seen in August 2011. . It was reported that the Zimbabwean government will seize nearly 28 hectares of land leased by Zimplats Holdings Ltd for reallocation of assets for local business. Yet, the move is expected to disrupt production of PGMs. Platinum is expected to continue to outperform gold with the platinum-to-gold ratio currently at a 17-month high. Meanwhile, production reports from miners indicated weakness output in the 4th quarter. Impala Platinum, the second-largest platinum producer, reported that its platinum output dropped -10% both q/q and y/y, to 411K oz in 4Q12. Total output for the calendar year 2012 was 1.46M oz, down -15.2% y/y.
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