The WSJ reports,"the spread between the prices of Brent and West Texas Intermediate crude oils has rebounded to about $9 a barrel two weeks after hitting a low for the year of less than $3.70.
The blob is the Midwestern glut of crude oil resulting from production arising from the shale boom running into logistical bottlenecks. These have eased somewhat, allowing that oil to migrate south from the storage tanks at Cushing, Okla., toward the Gulf Coast. However, because there is a ban on exporting U.S. crude oil, the barrels’ journey ends there".
So the blob is getting bigger. Stocks at Cushing have dropped by 16 million barrels since late January. But they have jumped by 43 million on the Gulf Coast in that time. Overall, U.S. commercial crude-oil inventories now stand at their highest level on record, according to Barclays.
The result: prices of U.S. crude grades like WTI are starting to disconnect from Brent, a global benchmark, again.
With a big blob of oil stuck there with nowhere to go, Gulf Coast refiners can name their price. That is great for the likes of Valero Energy, because they can then refine that oil into products like gasoline that are allowable for export.
The big losers are onshore oil producers who, with midterm congressional elections coming up, aren’t likely to see any change to U.S. oil-export policy soon. The blob abides.
