This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Oil Spread Is Back

NEW YORK ( TheStreet) -- Anyone looking for an economic tailwind needs to look at our handy chart on the spot price of oil.

In particular, look at the far right side of the graph. There are two oil prices. One is the world price, based on what's charged for Brent North Sea oil in Europe. The other is the U.S. price, defined as West Texas Intermediate, or WTI.

Since 2011, there has been a pronounced difference or spread between these prices. Early this summer, it seemed to be disappearing. Now it has widened again, and is at about $15/barrel according to the chart. Analysts, like Dan Dicker, who thought WTI would surpass Brent in July, now see the gap widening.

This is an enormous economic tailwind, notes Mark Perry on the American Enterprise Institute's blog Carpe Diem.The U.S. exports oil in the form of refined product, and that now totals more than 3 million barrels a day. In constant 2009 dollars, Perry expects that to exceed $7 billion this year, which would help limit the trade deficit.

That is in addition to the natural-gas glut, which has the benchmark "Henry Hub" price staying well below $4 per thousand cubic feet all next year, according to the CME Group's future contracts, while European consumers pay over $11/mcf. The explosion in production throughout the eastern Marcellus Shale means some folks there are getting even less than the Henry Hub price.

Energy price bulls remain bullish. Claude Salhani has written at that Saudi Arabia and Iran may be close to war. Saudi intelligence chief Prince Bandar told the country's Al Akhbar news service the country is shifting away from the U.S.

But the link between oil prices and economic growth seems to be broken now. In the past, crude prices were likely to jump on even the hint of better times. Now the Energy Information Agency sees U.S. fuel demand as flat while drivers buy more fuel-efficient cars.

How can this be bad? Well, fracking costs more than just sticking a pipe in the ground. Fracked wells lose their productive capacity quickly. That means the margin between costs and prices is narrower than it once was, and falling prices narrow it further.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $95.03 -2.90%
FB $116.73 7.20%
GOOG $691.02 -2.10%
TSLA $247.54 -1.60%
YHOO $36.59 -0.97%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs