A sudden surge in U.S. West Texas Intermediate crude prices that pulled Brent higher has shut off arbitrage routes for crude from the U.S. to Europe and Asia and is preventing oil from the Atlantic Basin from heading east, traders said.
The WTI price surge, driven by OPEC+ supply cuts led by Saudi Arabia and falling U.S. shale oil production, is altering global trade flows by keeping U.S. oil in the country and driving up demand and prices for other oil imported by Europe and Asia.
U.S. WTI crude futures CLc1 jumped more than $1 a barrel on Tuesday, pulling up Brent LCOc1 as well and widening prompt month spreads for both contracts in backwardation.
The backwardation – where front-month prices are higher than those in future months – indicates tight supply.
Brent’s strength also widened its premium to Middle East benchmark Dubai which hit a six-month high of $2.74 a barrel on Tuesday, LSEG data showed.
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