Opec and Russia should beware of poking the American bear
Widening spreads between crude delivery locations are driving midstream operators to seek new export channels, writes David Fickling
Here is one under-reported factor that may explain Russian and Saudi Arabian willingness to turn their backs on almost 18 months of Opec oil supply cuts: the spread between Brent crude and West Texas Intermediate (WTI) has reached its widest level in three years. The simple reason for this is that the shale oil boom has left crude sloshing around the US, resulting in a local oversupply. While Brent prices have risen about 14% over the past three months, WTI is up just 7.5% and Midland crude — the version of WTI priced in the booming Permian basin rather than the benchmark delivery point in Cushing, Oklahoma — is down 4.8%. The last time we saw these sorts of spreads, there were sound legal reasons for it. The US had forbidden almost all exports of crude oil for four decades until the end of 2015, so for many years its soaring shale oil production was trapped by the ban and the capacity limits of US refineries that were able to convert it into exportable products. The growing spreads...
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