Spread between Brent and WTI is GrowingBloomberg is showing that Brent is down 1.78% from Friday's close (NOT 6% - $34.14 at 1:30 ET) which suggest that it is hovering somewhere around the $35.00 mark (up to $36.00 and down to $34.00). Meanwhile, back at the the old Cushing ranch in the USA, oil is sitting at $31.50. So we have a spread between Brent and WTI of about 8% or around $2.64 USD. That is considerably higher than it has been since the new year. So, what is causing the spread? My take is that the scheduled refinery shutdowns for maintenance in the US (Cushing is now at 77% capacity) along with the stronger USD is being priced into WTI thus creating a larger spread between it and Brent. There are other factors no doubt, but those two will weigh heavy on WTI. As Zorgon stated a few days back, the shutdown season is upon the WTI refineries and this will cause the price of WTI to decrease. However, it will have less of an effect on Brent as we are seeing.
With production begining to slow down and hedges coming off, we are beginning to see pressure mounting on the price of oil to rise and NOT drop as some are suggesting. Impacts like the US refinery planned shutdowns will have a short-term effect of suppressing the PoO (WTI), but everything being equal we have seen the bottom and it was in th range of $26.00 - $27.00. Could the PoO dip into the mid-20's again? Well, anything is possible ofcourse, but the odds are much greater that the PoO has stabilized in the lower to mid 30s and is starting its long ride up to something more manageable for all concerned.
And forget about the Russians and Sauds making a deal. The Sauds strategy IS working and will fulfill itself this year. They ain't changing course now.