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Last updated: October 8, 2012 10:21 pm
The price difference between the two leading oil benchmarks traded at its widest in a year as tight physical supplies from the North Sea supported Brent against its US counterpart.
The “spread” or difference between Brent, which is seen as the global benchmark, and West Texas Intermediate, the US benchmark, widened to as much as $22.92 a barrel on Monday.
Both benchmarks eased on worries of lower demand, but ICE November Brent only fell 20 cents to $111.82 a barrel, while Nymex November WTI fell 55 cents to $89.33 a barrel, with the difference at $22.49.
Analysts said the widening price difference was a symptom of varying supply factors affecting the two benchmarks. “The oil market continues to face bipolar forces,” said Amrita Sen, chief strategist at Energy Aspects, the oil consultancy.
On the one hand, the Brent benchmark – a basket of four different North Sea crude oil streams traded independently in the physical market – was supported by lower than expected shipments of North Sea crude.
Loading schedules of North Sea crude in November show cargoes are expected to fall to the lowest for that month in at least five years.
October schedules also show lower than forecast loadings due to the delayed return of the Buzzard oilfield, one of the key suppliers contributing to the crude streams behind Brent, due to maintenance issues. Elsewhere, production growth in Brazil has disappointed, with Petrobras’ output falling to a 22-month low in August.
WTI, on the other hand, has continued to be affected by the high level of shale oil production as oil drilling in North America has remained active.
According to the latest data from the US Department of Energy, weekly US crude oil production was at the highest levels since 1996.
The long list of US refinery outages, both planned and unplanned, has also affected the WTI benchmark. While the fall in refining capacity has pushed up oil product prices, it has led to excess supply weighing on the crude market.
Ms Sen said US crude supplies were also being pushed up by the conversion of BP’s Whiting refinery in Indiana.
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