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Why Brent and WTI Crude Oil Are Diverging

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US crude oil

On April 26, US crude oil June futures rose just 0.2% and closed at $68.19 per barrel. That same day, the US dollar rose 0.4%, a factor that could have limited US crude oil’s upside.

Here are the performances of the US crude-oil-tracking ETFs on April 26:

  • United States Oil ETF (USO): rose 0.4%
  • PowerShares DB Oil ETF (DBO): rose 0.6%
  • ProShares Ultra Bloomberg Crude Oil ETF (UCO): rose 0.6%

That day, Denbury Resources (DNR) and WPX Energy (WPX) rose 4.1% and 1.5%, respectively, the highest among the oil-weighted stocks.

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Brent and WTI crude oil diverge

In the trailing week, Brent crude oil futures rose 1.3% compared to a 0.2% fall in US crude oil futures. On April 26, Brent crude oil futures closed at $6.55 more than WTI (West Texas Intermediate) crude oil futures, its highest level since December 28, 2017.

Concerns surrounding a possible reimposition of US sanctions on Iran, coupled with rising US crude oil production, could have widened this spread.

Natural gas

On April 26, natural gas June 2018 futures rose 1.1% and settled at $2.84 per million British thermal units. The EIA’s (U.S. Energy Information Administration) natural gas inventory report was released on April 26. It reported a decline of 18 Bcf (billion cubic feet) in natural gas inventories for the week ended April 20, which was 7 Bcf more than the market’s expected fall. In the trailing week, natural gas June futures rose 5.3%.

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