Analysts Look at WTI-Brent Spread

by Andreas Exarheas | Rigzone Staff
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas

Rigzone talks to analysts from the PRICE Futures Group and B. Riley Wealth.

In an exclusive interview with Rigzone, Phil Flynn, a senior market analyst at the PRICE Futures Group and regular contributor to Fox Business Network, highlighted that the spread between WTI and Brent “has come in a bit from its extended high of $13-$14 … closer to $7”.

“I think the main reason is because right now crude oil isn’t the problem. It’s still products like diesel,” he told Rigzone.

“If you look at the fact that we’re seeing more oil go through the Strait of Hormuz, even if Iran continues to try to cause havoc, and because of record U.S. oil production, the concern of our tight [oil] … supplies has eased, but it doesn’t solve our problem” he added.

In a separate exclusive interview with Rigzone, Art Hogan, Chief Market Strategist at B. Riley Wealth, noted that WTI and Brent historically trade with a spread in price between $8 to $10 “due largely to the nature of their comparative transportation methods”.

Hogan pointed out to Rigzone that Wednesday’s spread was about $13.

“Disruptions in the Suez Canal, Bab el-Mandeb, or the Strait of Hormuz force tankers to take longer routes,” he said.

“This spikes ocean freight insurance and transit costs. Because Brent is priced on waterborne delivery, these shipping premiums directly inflate Brent’s price, widening the spread,” he added.

In a market analysis sent to Rigzone on Thursday morning, Naeem Aslam, CIO at Zaye Capital Markets, highlighted that Brent crude was trading at around $96.92 per barrel and that West Texas Intermediate was trading near $89.18 per barrel, “with both benchmarks pulling back after strong September gains”.

“Brent gained roughly 14 percent during September, but prices are easing today as Gulf crude exports recover and U.S. inventories unexpectedly increased by 922,000 barrels,” he said.

“Saudi export flows through alternative routes have also improved, reducing some of the immediate scarcity premium,” he added in the analysis.

Aslam went on to warn, however, that we are not yet in a normal supply environment.

“Middle East flows remain vulnerable, tanker risks persist around the Strait of Hormuz, and the latest global supply data still show a market operating with unusually small buffers,” he noted.

In a market quick take posted on its website on Thursday, Saxo Bank highlighted that Brent was trading below $97 per barrel on the December contract, “down 1.5 percent, easing after Wednesday’s 1.2 percent gain”.

“Uncertainty persists over whether the recovery in Middle East crude flows to near pre-war levels can be sustained and, importantly, whether still-low fuel supplies will soon follow,” the quick take outlined.

In a report sent to Rigzone late Tuesday, Standard Chartered Bank Energy Research Head Emily Ashford highlighted that WTI’s discount to Brent continued to deepen and was sitting at over $12 per barrel, “its widest since early May”. Aslam outlined, in a market analysis sent to Rigzone on Wednesday morning, that the WTI-Brent gap stood at just over $14.

The U.S. Energy Information Administration (EIA) projected in its latest STEO at the time of writing, which was released last month, that the Brent crude spot price will average $91.01 per barrel in 2026 and $73.74 per barrel in 2027. This STEO projected that the WTI spot price will average $84.65 per barrel this year and $69.74 per barrel next year.

A quarterly breakdown included in that report saw the Brent spot price coming in at $89.11 per barrel in the third quarter of this year and $90.66 per barrel in the fourth quarter. This breakdown projected that the WTI spot price will average $84.01 per barrel in the third quarter of this year and $85.98 per barrel in the fourth quarter.

The breakdown showed that the Brent spot price averaged $81.11 per barrel in the first quarter of this year and $102.93 per barrel in the second quarter, and that the WTI spot price came in at $72.74 per barrel in the first quarter and $95.48 per barrel in the second quarter.

by Andreas Exarheas | Rigzone Staff
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas