Brent/WTI spread widens to $9.81/b after US crude oil inventory build

The ICE Brent/WTI spread widened during mid-morning trading as a steep decline in refinery utilization weighed on US crude oil futures.

Total US refinery capacity dropped by 5 percentage points to 90.4% during the week ended 21 September, according to US Energy Information Administration data. The decline in refinery runs exceeded analyst expectations of a 0.6 percentage point decline, and capacity was at its lowest level since early-March 2018.

Lower-than-expected refinery runs are bearish for WTI relative to Brent, and the Ice Brent/WTI spread jumped to $9.81/b following the EIA release.

ICE November Brent was down 27 cents at $81.60/b and NYMEX November WTI was 39 cents lower at $71.89/b.

Total commercial crude inventories climbed 1.85 million barrels to 395.99 million barrels during the week ended 21 September, EIA said. The build ran counter to analysts expectations of a 2.2 million barrel decline.

Crude futures were trading lower ahead of the EIA release. At 1420 GMT prompt WTI was down 48 cents at $71.80/b and ICE November Brent was 59 cents lower at $81.28/b.

The morning's pull back in crude prices may have been due in part to concerns that the market is running too hot. A Bollinger band analysis of WTI and Brent futures showed that prices in recent days have moved into overbought territory, according to data provider MarketView. Prior to moving lower on Wednesday morning, ICE Brent was up more than 4.5% from Monday's open and WTI had strengthened by 2.3% during the same period.

The EIA report showed a bullish 2.24 million barrel draw in distillate stocks, despite analyst expectations of a 667,000 barrel build. NYMEX October ULSD moved briefly into positive territory before moving lower by 6 points to $2.3047/gal. The draw slowed declines in ULSD futures, which were down 1.20 cents at $2.2933/gal ahead of the release.

Gasoline stocks moved higher last week by 1.53 million barrels, EIA said. NYMEX October RBOB prices were down 73 points at $2.0604/gal, up slightly from just prior to the release when futures were 1.57 cents lower at $2.0520/gal.

source: S&P Global Platts