WTI to Brent Spread

[dan_s]

West Texas Intermediate (WTI) discount to Brent is on the way down. My forecast is that WTI's discount to Brent will be around $13/bbl by December, 2013 and keep falling to around $8/bbl by December, 2014. I also believe that OPEC will adjust production to support Brent at $110/bbl. - Dan
The WTI front month futures contract that trades on NYMEX is the price you see quoted in the news each day.

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The expanded Seaway Pipeline, along with other new crude shipping capacity, marks a new era for the U.S. oil industry, soon flooding the Gulf Coast with light, sweet grades and signaling the region's impending disconnect from the North Sea benchmark Brent, according to Platts Oilgram News.

Earlier this month, the Seaway Crude Oil Pipeline Co. completed an expansion that boosted crude capacity to 400,000 barrels a day, nearly triple previous levels, between the Cushing, Okla., storage hub and the Texas Gulf Coast. Last May, the pipeline's inland flow was reversed amid efforts to address a glut in the central U.S.

The Seaway Pipeline expansion "allows Gulf Coast refiners to participate in the raw material advantage that we’ve seen in the Midwest," industry consultant Andy Lipow told Platts Oilgram News. "I anticipate seeing Gulf Coast refiners running high operating rates, [which will] translate the crude oil surplus into a petroleum products surplus, given the stagnant demand for refined products in the U.S.," he added.

Refining margins along the Gulf are expected to improve with the influx of "advantaged" crudes, but eventually regional crude prices will come under pressure from the new supply, analysts said. The WTI-Brent spread narrowed sharply earlier this month, as the Seaway expansion renewed market optimism that additional export capacity will help cut heavy stockpiles at Cushing.