From Reuters:
Watch the shale spread: Brent vs WTI crude oil prices
U.S. shale oil is deepening the discount of U.S. crude prices to global benchmarks, with the price gap turning into the de facto indicator of the health of American shale supply, a shale spread of sorts.
The gap between West Texas Intermediate (WTI) and Brent expanded to its biggest in a year at almost $12 a barrel as U.S. oil stocks hit records while global demand supported Brent. The surging U.S. production and inventories point to an "oversupplied market which is hard to ignore," ANZ Bank said in a report on Friday.
Prior to the rise of U.S. shale oil production more than half a decade ago, the spread between WTI and Brent had moved very little for 20 years, largely hovering around zero.
The emerging U.S. glut has since weighed on WTI, which is increasingly a more domestic price gauge than a global one, while non-U.S. benchmarks rise up and down according to demand from Asia and geopolitics in the Middle East.
One factor that could narrow the spread would be a dramatic cutback in shale production as weaker crude prices challenge the economics of shale oil. The spread could shrink further if, or when, the United States adds to world supply with crude exports, which are banned for reasons of protecting national resources for domestic consumption.
And from Investing.com, Feb. 26:
Opec's blueprint?
The spread between Brent crude and WTI has widened to a 12-month plus high of $10.78/barrel and someone very high up in Opec is probably enjoying the wryest of smiles as we speak.
Far be it for from the floor to suggest a masterplan has been at work here, but with the global oil cartel's pricing linked to the Brent benchmark, the hold market share at-all-costs strategy embarked upon at its November meeting is starting to pay dividends.
"This is a really nice situation for Opec and its members with their profitability going up while WTI stands still and that means there is very little support for the shale sector in the US," says Saxo Bank's head of commodities, Ole Hansen.
Demand is on the rise for Brent, according to a senior Opec official yesterday from Saudi Arabia, helping to propel it to $61.45/barrel at 0755 GMT today, a stark contrast to WTI's laboured $50.73/b.
Yet another huge increase in US oil inventories in yesterday's EIA report is stymieing any hopes WTI has of joining Brent on its upward trajectory with inventories at main US storage hub Cushing rising to 48.6 million barrels.
That has also seen the contango between the front-month WTI price and the second-month widen to $2/b leaving the US benchmark seemingly marooned in "rangebound territory for a while," says Hansen.
Hansen suggests that while there may be a selloff this morning, Brent crude could yet go higher to test the $63/b and even the $65/b area while WTI "is going nowhere fast".
