WTI, the next leg up ?

The ICE Brent Dec-21 contract is consolidating at the 85 $/b, at odds with the rally in US equity markets, which usually boosts commodity prices. Indeed, the recent report on positioning showed that money-managers were diverting exposure from the Brent market – 31k of reduced long exposure on the Brent instrument – to the WTI market. The WTI-Brent spread had a sustained rally due to this, as the tight global crude oil picture starts to push all Brent differentials higher. WTI-Brent prompt spread is now trading at -2.6 $/b, from 4.4 $/b earlier this month, which will limit the US exports. Interestingly, yesterday’s API survey showed a build in US crude stocks of 3.3 mb, while Cushing stocks dropped again by 2.5 mb w/w, lending further support to the spread. The reversal of a line from the Midwest to Louisiana, expected on mid-October to November, according to a FERC filing, will also be reducing stocks by approximately at the Cushing pricing point. Diesel and gasoline inventories dipped by 6 mb combined, indicative of the turnaround season for US refiners.