Crude oil futures regained momentum after early losses on Friday, June 1, but the U.S. benchmark is set for a second consecutive week of declines as U.S. oil output comes close to matching that of top producer Russia.
North Sea Brent crude’s premium over West Texas Intermediate (WTI) futures remained near three-year highs above $10 a barrel, having surpassed $11 on Thursday.
The premium has doubled in less than a month, as a lack of pipeline capacity in the United States has trapped a lot of 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.
“The WTI/Brent spread is wide far down the curve and apparently not reflecting the notion that easing infrastructural constraints and slower U.S. supply growth should begin to reconnect both markets in the medium term,” JBC said in a note.
WTI CLc1 gained 11 cents to stand at $67.15 a barrel by 0820 GMT, bouncing off a session low of $66.81 and having fallen almost 2 percent on Thursday.
Global benchmark Brent LCOc1, little changed in the previous session, was up 12 cents at $77.68 per barrel.
For the week, WTI was on track for a 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 1.6 percent for the week, widening the spread between the two benchmarks.
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 later in the week, however, when a Gulf source flagged that any rise in production would be gradual, Reuters reports.
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.
