NEW YORK (Reuters) – Most US cash crude differentials weakened or were little changed on Thursday as the spread between Brent and US crude futures narrowed, reducing Brent’s premium to the US counterpart.
The Mars sour crude grade saw the heaviest trading, brokers and traders said, with refiners showing the most interest.
Usually the wider the arbitrage – currently Brent’s premium to US crude – the more supportive for US cash crude differentials, especially for sweet grades that are priced in line with other global waterborne crudes like Brent.
The spread between the two April contracts ended at $20.28 a barrel on Tuesday, with the Brent March contract expiring and going off the board with the spread between Brent and US March contracts ending at $21.71 a barrel.
Brent’s premium to US crude reached $23.45 during Friday’s session, its highest level since Nov. 23, before the spread ending at $23.18.
After Brent’s premium to US futures fell on expectations the ability to move crude from the Midwest to the US Gulf Coast was increasing, the premium rallied in late January after constraints on the Seaway pipeline limited shippers’ ability to reduce the elevated crude stockpiles in the Midwest.
Seaway is a recently expanded 400,000 barrel-per-day (bpd) pipeline that connects the Cushing, Oklahoma hub – delivery point for the US light sweet crude futures contract – and the US Gulf Coast and that region’s concentration of refineries.