WTI oil price nears $86, demand suggests it’s undervalued

WTI oil prices open today’s trading session hovering near $86 a barrel, while Brent nears the $100 mark, the million dollar question is whether Brent is overvalued, or, if WTI is undervalued.

Latest WTI Oil Price

US Light crude oil futures for March 2011 delivery was trading at $85.56 a barrel, 08.20 GMT this morning on the NYMEX, while Brent trades over $98, around a $12 premium to the US WTI contract.

Overvalued or Undervalued?

WTI oil futures seem to be under attack from the latest data out of the US, painting a grim picture amid concern that the pace of oil demand recovery in the US, the biggest crude oil consuming nation, may falter.

Applications for jobless benefits in America increased by 51,000 to 454,000 in the week ended 22nd January, the US Labor Department figures showed yesterday. Other data, including higher WTI oil stocks at Cushing, as reported earlier this week, had a negative effect oil WTI prices, but Brent oil futures remain bullish.

Money managers trimmed their net long positions in NYMEX WTI crude by 2.3% but raised their net long positions in Brent crude in the week ended 18th January, according to data from the US CFTC (Commodity Futures Trading Commission).

Earlier this week, Saudi Arabia’s oil minister says he expects global oil demand to climb as much as 1.8 million barrels per day for 2011. With global oil demand set to grow again this year, it’s difficult to see that WTI oil prices seem overvalued. More to the point, trading WTI higher seems the most likely path.

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