Crude oil prices settle up while WTI’s discount to Brent deepens

Crude oil prices rose on Monday as the Organization of the Petroleum Exporting Countries (OPEC) reported that the global oil glut has been virtually eliminated, while US crude’s discount to global benchmark Brent widened to more than $7, its deepest in five months. Global benchmark Brent gained $1.11 to settle at $78.23 a barrel. West Texas Intermediate (WTI) crude rose 26 cents to settle at $70.96.

NEW YORK — Crude oil prices rose on Monday as the Organization of the Petroleum Exporting Countries ( OPEC) reported that the global oil glut has been virtually eliminated, while US crude’s discount to global benchmark Brent widened to more than $ 7, its deepest in five months.

Global benchmark Brent gained $ 1.11 to settle at $ 78.23 a barrel. West Texas Intermediate ( WTI) crude rose 26 cents to settle at $70.96.

WTI’s discount to Brent was as much as $7.28, its widest since Dec. 12 on surging US output.

US shale production is expected to hit a record 7.18 million barrels per day ( bpd), the Energy Information Administration said.

The production growth may be far from over, contributing to US crude’s discount to Brent, analysts said.

“You have the threat that a high enough price will start to activate the 7,700 drilled but uncompleted wells in the Lower 48 states,” said Walter Zimmerman, chief technical analyst at ICAP TA.

Contrastingly, OPEC’s latest report was more bullish.

“That absolute plunge in Venezuelan production ... just highlights how tenuous the market is in terms of the supplyand-demand balance,” said John Kilduff, a partner at Again Capital LLC.

Even so, OPEC and its allies were still trimming output more than their supply-cutting pact required.

Meanwhile, output from thirdlargest OPEC producer Iran is uncertain on renewed US sanctions.

“If Iranian crude is really taken off the water, it’s going to impact Brent much more than it’s going to impact WTI,” Mr. Zimmerman said.

It is unclear how US sanctions will affect Iranian oil. Much will depend on how other major oil consumers respond to Washington’s action against Tehran, which will take effect in November.

“Germany has said it will protect its companies from US sanctions, Iran has said French oil giant Total has yet to pull out of its fields and all the while it seems the Chinese are ready to fill the void created by the US,” said Greg McKenna, chief market strategist at AxiTrader.

Michael Wittner, analyst at Societe Generale, forecasts US sanctions will remove 400,000 to 500,000 bpd of Iranian crude from the global market.

Inventories at Cushing, Oklahoma, the delivery point for US crude futures, fell about 410,000 barrels between May 8 and May 11, said traders, citing data from market intelligence firm Genscape.

“The expectation that there’s going to be a drawdown in crude stocks this week is keeping the market very tight,” said Phil Flynn, analyst at Price Futures Group. —