Brent/WTI narrows to lowest spread of 2021 on US recovery

28 May 2021

London (Quantum Commodity Intelligence) – The keenly watched Brent/WTI spread narrowed sharply during the second half of May as benchmark WTI futures outpaced North Sea Brent on an improving US economy that has forced stock levels at the Cushing storage hub to a 14-month low.

The spread for July was trading at around $2.55/b in early London Friday (0815 GMT), down $1/b from the monthly low of around $3.50/b on May 10, and down around $0.50/b since the start of the week.

It also marks the narrowest spread since December of 2020, according to exchange data.

July Brent expires later Friday, with the August Brent/WTI spread also trading at around $2.50/b.

A narrow Brent/WTI spread typically makes US crude grades more expensive compared to Brent-linked grades.

The June Brent/WTI spread was trading close to $4.00/b in late April, the widest since February.

This week's inventory data from US Energy Information Administration showed US crude stocks falling by over 1.5 million barrels in the seven-day period to May 21, including a 1 million barrel drop at Cushing, which is the delivery hub for NYMEX WTI futures.

Cushing stocks stood at 44.8 million barrels, the lowest level since March 2020, said the EIA.

US figures Thursday showing jobless claims continuing to fall, along with positive business sentiment helped lift boost US markets.

"Applications for unemployment benefits in the US fell for the fourth consecutive week to a fresh pandemic low as businesses reopened.' said Daniel Hynes, senior commodity strategist at ANZ.

"This comes as American drivers hit the road in increasing numbers. In fact, they are now travelling as many miles on interstates highways as they did in 2019," noted Hynes.  

Meanwhile, doubts were cast on the June 21 UK plan to lift all coronavirus restrictions, as cases of the Indian strain of COVID-19 increase sharply.