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FxWirePro: Brent-WTI spread highest in 18 months

In the latest up bullish leg that began in June this year, the North Sea benchmark Brent has been a much better performer than the WTI. After bottoming around $42 per barrel, the North American benchmark WTI has gained more than 15 percent, while Brent has gained more than 18 percent. The outperformance of Brent over WTI has pushed the spread (Brent-WTI) from $2 per barrel to $4.2 per barrel. This is the highest level for the spread since February last year, when the oil price made an important bottom around $27 per barrel.

The Brent benchmark, which derives its price from North Sea blend is more extensively used by the Middle East producers and hence have an influence. The increased spread most likely discounting the increased production in North America, while the supplies are short from the Middle East due to ongoing production cap. OPEC members have agreed to cut production by 1.76 million barrels last November and extended the agreement until March next year at a meeting in May.  In addition to that, Saudi Arabia has pledged to reduce exports by almost a million barrels per day by August this year, compared to a year ago. The data show that exports have already declined to the lowest level in 33 months.

WTI is currently trading at $48.5 per barrel and Brent is at $4.1 per barrel premium to WTI.

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