The gap between Brent and WTI, the most-widely traded commodity futures spread, contracted to the least since Jan 26, 2012. The spread has narrowed amid the restoration of North Sea output, reduced estimates for global demand and diminished concern that political tension in the Middle East will disrupt the region’s oil exports.
“The current tightening of the spread is attributable above all to Brent-specific factors, such as the normalization of North Sea supply and weaker demand for North Sea oil,” said Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt.
Brent has slumped as the return of North Sea oil fields last month such as Buzzard and Elgin-Franklin after repairs coincides with weaker demand forecasts and diminished concern that the dispute over Iran’s nuclear program will escalate. U.S. benchmark WTI has been little changed this year as expanded pipeline capacity helps relieve a glut at the nation’s storage hub in Cushing, Oklahoma.
Brent has lost 8.5 percent this year, trading today at $101.65 a barrel on the London-based ICE Futures Europe exchange. WTI on the New York Mercantile Exchange was at $91.74, down 0.1 percent this year.
The difference between the two benchmarks shrank to as little as $9.94 a barrel today. It was at $9.75 on an intraday basis in January 2012. It expanded to a record of more than $28 a barrel in October, 2011.
Daily exports of North Sea Brent, Forties, Oseberg and Ekofisk crudes, which make up the Dated Brent benchmark, will increase by 1.5 percent in May from this month to 893,548 barrels a day, loading programs obtained by Bloomberg News show.
WTI’s loss this year has been contained as expanded pipeline capacity eased a glut at the U.S. storage center in Cushing. Enterprise Products Partners LP (EPD) and Enbridge Inc. (ENB) switched the direction of the Seaway line last year to move barrels from the Midwest and Canada to Houston.
Oil consumption in the most developed European economies will drop to 13.4 million barrels a day this year, the lowest since 1985, the International Energy Agency said in its monthly market report on April 11.
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