The 10 per cent slide in US benchmark crude oil futures this week reflected concerns about rising US inventories and signs of a slowing US economy. It has set the tone for prices to fall further in the short term.

The decline in the front-month West Texas Intermediate contract on the New York Mercantile Exchange was greater than the 5 per cent slide in Brent futures traded in London. This left Brent at a premium to the WTI contract, even though it is the latter that has traditionally traded at a premium.

Philip Verleger, an oil consultant at PK Verleger, said this change in pricing for Brent and WTI reflected the fact that more high-quality light, sweet crudes, which are produced in the North Sea and west Africa, are being exported to China, where refineries are mainly equipped to refine lighter crudes.

Mr Verleger said this had led to more lower-grade crudes being exported to the US, where refiners such as Valero and ExxonMobil have configured plants to process higher sulphur crude into petrol, diesel and jet fuel.

“The arbitrage to sell Brent crude into the US market has gone,” he said. But this pricing differential may not last as current forward pricing for both WTI and Brent shows WTI prices rising well above Brent prices from September onwards.

West Texas Intermediate for June delivery settled down $2.05 on Friday at $49.72 a barrel, a fall of 10 per cent on the week and the first time since February 18 that Nymex crude has settled under $50. In London, Brent crude fell $1.39 to $51.09.

Mr Verleger said a lot of this year’s price increases had been driven by the petroleum product market as gasoline prices have risen more than crude prices. Likewise, the 7 per cent slide in US gasoline futures this week was a significant factor behind the drop in crude prices.

“Crude prices are being driven by the tightness in refinery capacity; it has little to do with the supply in oil,” he said.

Growing US dependence on foreign oil was underlined this week with oil imports of 10.9m barrels a day, the third-largest import figure in history.

The week also saw another oil company raise its long-term price target. Statoil, the Norwegian state-controlled oil producer, raised its planning price assumption to $25-$30 a barrel from $22, after it bought Gulf of Mexico assets of EnCana of Canada.

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