Brent Crude Trailing WTI Through 2017 as Iran Oil Exports Loom

  • March WTI oil closes $1.23 higher than Brent for same month
  • Nuclear sanctions on Iran might be lifted as soon as Monday

Brent oil is trading at a discount to West Texas Intermediate crude through October 2017 as an expected surge in Iranian production adds to oversupplies in Europe and falling U.S. output trims the glut in America.

"Historically, WTI traded at a premium to Brent and it looks like we’re moving back to that," said Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management in Houston. "The Iran headlines add to the negative pressure on Brent."

March WTI futures ended $1.23 more expensive than same-month Brent Thursday. The contract was $2 less than Brent as recently as November.

WTI has outperformed Brent this week on speculation a nuclear deal between Iran and world powers may be implemented by the time markets open on Monday, triggering sanctions relief for the Islamic Republic that paves the way for a surge in oil exports. Waterborne Brent crude, the global benchmark traded in London, is projected to feel the brunt of competition with Iranian barrels.

"It’s all about the Iran situation," said Bob Yawger, director of the futures division at Mizuho Securities USA in New York. "The end of sanctions is expected sooner, rather than later."

U.S. production is forecast to average 8.73 million barrels a day this year, down 7.4 percent from 9.43 million in 2015, according to the Energy Information Administration. Output will probably further decline to 8.46 million in 2017, the EIA said.

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