Brent-WTI Spread Hits $15, Corn hits three year high

Commodities are trading slightly lower Thursday, taking direction from some risk aversion in the broader markets after a series of weaker than expected Q4 earnings figures in Europe.

The oil markets have seen the WTI-Brent spread widen to over $15/bbl today, with Brent pushing above the $102/bbl mark while at the same time the front WTI contract slipped to below $87/bbl. As has been the case in recent weeks, this divergence comes very much from the high levels of US inventories reported from the Department of Energy (DoE) yesterday.

Despite the latest data released by the Energy Information Administration (EIA) actually showing a mild 0.9 million barrels (mbls) decline in stocks at Cushing, the key delivery hub for WTI, the large 1.9mbls build in crude stocks as a whole pressured an already unsure market. Products too suffered following the data, particularly gasoline where stocks rose 4.7mbls in the week, middle distillates rising only 0.3mbls. The rise in gasoline stocks actually brings levels to 20-year highs, while the report also showed demand for gasoline fell to it slowest point 7 years.

Both the precious and base metals complex are seeing another day of lacklustre performance with a lack of fundamental news to shift direction either way. Ben Bernanke’s testimony to the Budget Committee for the House yesterday gave no unexpected news, all indications that the Fed will continue its current monetary policy for some time; maintaining interest rates and quantitative easing levels. Gold has been seeing some pressure coming from the fund arena yesterday, with the world’s largest gold ETF, SPDR Gold Trust, reporting a net liquidation of 2 tonnes.

The world’s largest tin producer, Indonesia’s PT Timah showed indications of falling production in the country, after they reported they produced 10% less in 2010 compared with the previous year, at only 40,400 tonnes. the company said that given the persistent weather conditions in the region, production is not likely to be expanded this year and as such, would expected global tin prices to remain at a premium.

In the agricultural complex, corn has topped the $7 a bushel mark on the CBOT for the first time since the financial crisis hit in 2007, following another downward revision from the US Department of Agriculture (USDA) of expected US corn stocks; now expected to total the lowest level in 15 years at only 17.1 million tonnes. This results in a stocks-to-use ratio of  just 5%, which is only slightly higher than the record low measured in 1937.

(Source: http://www.proactiveinvestors.com/companies/news/12182/commoditiesbrent-wti-spread-hits-15-corn-hits-three-year-high-12182.html)