The premium of Brent over WTI dropped to nearly the lowest in six months in volatile and mixed oil trade on Thursday, in which a weaker dollar and a Saudi pledge to more than overcomply with the production cuts supported prices, while concerns of oversupply from U.S. shale and increased U.S. inventories dragged prices down.
The discount of WTI to Brent is now just above $3.00 a barrel, which threatens to undo the recent U.S. oil export surge that was mostly due to the huge spread after Hurricane Harvey in September. The Brent premium over WTI hit a peak at over $8 per barrel in late September, but still traded at elevated levels for the rest of 2017.
Oil prices were seesawing on Wednesday and Thursday, with U.S. inventory data in and Saudi Arabia pledging to cut even more from its production in March.
On Wednesday, Saudi Arabia said that it would cut additional 100,000 bpd of its oil production next month and keep its exports below 7 million bpd in a bid to help clear the global oversupply and counteract the recent oil market volatility.
Later on Wednesday, after reporting two consecutive weekly crude oil inventory builds, the EIA continued with another build, of 1.8 million barrels for the week to February 9. After four gasoline inventory builds and one draw since the start of the year, for the week to February 9 the EIA reported a build of a hefty 3.6 million barrels.
“Persistently high oil production in the United States, the country’s gasoline stocks at their highest level since March 2017, and a shrinking price premium of Brent over WTI crude portrays a bearish picture for oil prices,” Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics, told Reuters today.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.