Brent premium over WTI hits new 3-year high

[June 01, 2018]  By Shadia Nasralla

LONDON (Reuters) - The spread between Brent crude oil futures contracts and U.S. WTI stood at its widest for three years on Friday with the latter set for a second consecutive week of declines as U.S. oil output comes close to matching that of top producer Russia.

 A maze of crude oil pipe and equipment is seen with the American and Texas flags flying in the background during a tour by the Department of Energy at the Strategic Petroleum Reserve in Freeport, Texas, U.S. June 9, 2016. REUTERS/Richard Carson

To view a graphic on Brent soars, others lag, click: https://reut.rs/2JmAsvJ

The premium has doubled to more than $11 a barrel in about a month as a lack of pipeline capacity in the United States traps much of the output inland.

U.S. crude production has been rising to record levels since late last year. In March, it jumped 215,000 barrels per day (bpd) to 10.47 million bpd, a new monthly record, the Energy Information Administration said on Thursday.

To view a graphic on Russia verses Saudi verses U.S. oil production, click: https://reut.rs/2J1fC51

"The move on that spread is difficult to anticipate as it does not necessarily react to news, headlines etc.. One can be long or short on either of the benchmark and be stopped-out by the volatility of the Brent-WTI," Petromatrix said in a note.

WTI <CLc1> fell 63 cents to stand at $66.41 a barrel by 1106 GMT, having gained earlier in the session.

Global benchmark Brent <LCOc1>, staying within Thursday's range, was up 23 cents at $77.79 per barrel.

For the week, WTI was on track for a 2.1 percent fall, adding to last week's near 5 percent decline and shrugging off a 3.6-million-barrel drop in U.S. crude stockpiles last week. [EIA/S]

Brent was set to rise 1.8 percent for the week.

Sources told Reuters last week that Saudi Arabia, the effective leader of OPEC, and Russia were discussing boosting output by about 1 million bpd to compensate for losses in supply from Venezuela and to address concerns about the impact of U.S. sanctions on Iranian output.

This pushed Brent to a three-week low below $75 a barrel on Monday. Brent recovered, however, when a Gulf source flagged that any rise in production would be gradual.

Russia would be able to raise its oil output within months to levels last seen before a global production-cutting deal took effect if there is a decision to unwind the pact, a Russian Energy Ministry official said.

(Additional reporting by Roslan Khasawneh and Naveen Thukral; Editing by Louise Ireland)

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