U.S. oil price gets closer to global benchmark as glut shifts
LONDON (Bloomberg) -- U.S. oil prices narrowed their discount to international benchmark Brent as a supply glut in North America abated, even as it grew elsewhere.
West Texas Intermediate futures for November delivery climbed 2.4%, trading for $2.29/bbl less than the corresponding contract for Brent. The spread between the two averaged $2.25 last week, the least since January. U.S. prices are being supported by faltering output and supply disruptions in Canada, while Brent is under pressure from rising shipments from the North Sea and West Africa, according to Barclays Plc.
“Several themes have been driving the reduction in the spread, including a shifting North American landscape, light oil abundance in the Atlantic Basin and concerns about the overall health of the global economy,” Miswin Mahesh and Michael Cohen, analysts at Barclays, said in a report on Monday.
U.S. crude production has declined for six weeks as the price slump over the past year takes its toll on the nation’s shale-oil industry. Meanwhile OPEC has sustained output amid a global glut, producing above the group’s target of 30 MMbpd for a 15th month in August, according to data compiled by Bloomberg.
WTI for October delivery, which expires Tuesday, was at $45.73/bbl on the New York Mercantile Exchange, up $1.05, at 1:45 p.m. London time. The contract lost $2.22 to $44.68 on Friday. The volume of all futures traded was about 15% below the 100-day average. The more active November contract rose $1.04 to $46.06.
Brent for November settlement advanced 87 cents to $48.34/bbl on the London-based ICE Futures Europe exchange. Front- month prices slid 1.4% last week.
Brent has weakened relative to WTI as shipments from Nigeria and Angola -- which are priced using the European benchmark -- reach their highest since 2008, Barclays said. Exports from the North Sea, where the Brent field is located, are forecast to climb next month.
The contraction in the WTI-Brent spread is unlikely to last as Canadian output recovers after technical problems and inventories at the main U.S. crude-storage hub accumulate once nearby refiners begin seasonal maintenance, Adam Longson, an analyst at Morgan Stanley in New York, said in a report.
Oil is down about 50% from a year ago in New York amid a global oversupply that Goldman Sachs Group Inc. predicts may keep prices low for the next 15 years.
Hedge funds cut bets on falling WTI prices last week, leaving them the most bullish in two months, data from the Commodity Futures Trading Commission show. Money managers’ net-long position in WTI rose by 14,821 contracts to 147,678 futures and options in the week ended Sept. 15.
