MTECHTIPS;-Mecklai Graph: Swelling gap between WTI & brent crude

MTECHTIPS;-Mecklai Graph: Swelling gap between WTI & brent crude

Below graph depicts movement of WTI crude and Brent in the last one year

The gap between the two most widely traded oil contracts blew out to its widest level in a year further evidencing that the US and European oil markets are diverging. The gap widened to an intraday high of USD 22.86 a barrel, the widest differential, or "spread," between the benchmarks since Oct. 19, 2011. The growing gap came on the back of increased oil production in the US, while supplies in the North Sea, which supplies the oil underlying the Brent contract, remain tight.

The widening spread is the latest divergence between the US and European oil markets. The two contracts historically have traded in lockstep but began to separate early last year and have traded roughly USD 10 to USD 20 apart ever since. The widening spread comes amid a backdrop of weakening demand for crude oil. Oil prices were broadly pressured Monday after the World Bank cut its economic growth forecast for China, the world's No. 2 consumer of crude oil. Going ahead further divergence may be witnessed as geopolitical tensions in the Middle East aggravate while the supplies in US keep mounting due to faltering demand.

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