Brent premium over WTI hits new three-year high

The spread between Brent crude oil futures contracts and US WTI stood at its widest for three years on Friday with the latter set for a second consecutive week of declines as US oil output comes close to matching that of top producer Russia.

The premium has doubled to more than USD 11 a barrel in about a month as a lack of pipeline capacity in the United States traps much of the output inland.

US crude production has been rising to record levels since late last year. In March, it jumped 215,000 barrels per day (bpd) to 10.47 million bpd, a new monthly record, the Energy Information Administration said on Thursday.

“The move on that spread is difficult to anticipate as it does not necessarily react to news, headlines etc.. One can be long or short on either of the benchmark and be stopped-out by the volatility of the Brent-WTI,” Petromatrix said in a note.

WTI fell 63 cents to stand at USD 66.41 a barrel by 1106 GMT, having gained earlier in the session.

Global benchmark Brent, staying within Thursday’s range, was up 23 cents at USD 77.79 per barrel.

For the week, WTI was on track for a 2.1 percent fall, adding to last week’s near 5 percent decline and shrugging off a 3.6-million-barrel drop in US crude stockpiles last week.

Brent was set to rise 1.8 percent for the week.

Sources told Reuters last week that Saudi Arabia, the effective leader of OPEC, and Russia were discussing boosting output by about 1 million bpd to compensate for losses in supply from Venezuela and to address concerns about the impact of US sanctions on Iranian output.

This pushed Brent to a three-week low below USD 75 a barrel on Monday. Brent recovered, however, when a Gulf source flagged that any rise in production would be gradual.

Russia would be able to raise its oil output within months to levels last seen before a global production-cutting deal took effect if there is a decision to unwind the pact, a Russian Energy Ministry official said.