Dicker: Spread Between Brent and WTI 'Ridiculous'
Published: Thursday, 8 Sep 2011 | 6:48 PM ET
By: Michelle Fox
Web Producer
Independent oil trader Dan Dicker thinks the spread between Brent crude [LCOCV1 114.10 --- UNCH  ] and WTI [CLCV1 88.63  -0.42 (-0.47%) ] could hit $35, a sum he calls “entirely ridiculous.”
“It’s impossible for these two grades of crude to have gotten this far apart unless something really financially broken is affecting both markets,” Dicker said. “In fact, that’s what’s been happening.”
Brent is becoming a safe haven trade and has been finding a correlation with gold to a much larger degree than anything oil-related should, he said.
“Global growth is terrible, demand is going down, everything should point to a crude price going lower and yet it’s really sticky up here,” Dicker added. “So you have to look at something else that’s affecting the prices and that to me seems to be very much the safe haven trade.”
To take advantage of Brent’s pricing, Dicker suggests playing E&P companies like Apache [APA 98.22 -1.40 (-1.41%) ], Anadarko Petroleum [APC 72.29 -1.13 (-1.54%) ], Chesapeake Energy [CHK 31.96  0.45 (+1.43%) ], SandRidge Energy [SD 7.34 -0.05 (-0.68%) ], EOG Resources [EOG 89.25 -1.42 (-1.57%) ] and Cabot Oil & Gas [COG 74.30 -2.82 (-3.66%) ].
“If Brent stays sticky at $115, these guys will absolutely mint money over the next two quarters,” he said.
**************************************************************************************************************
Not sure why this guy's so flummoxed about the WTI-Brent spread, the fact that WTI is landlocked has been well aired.
Even more curious is his list of companies to buy "to take advantage of Brent's pricing". Hopefully someone can help me out in figuring out why someone like a CHK or SD "will absolutely mint money" over the next 2 quarters, given that, as far as I can tell, neither will sell a single barrel of oil at Brent pricing over that time.
|
