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WTI Cushing–WTI Midland Spread at Highest Level since August 2014

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WTI Cushing-WTI Midland crude oil spread

WTI (West Texas Intermediate) is the US benchmark for crude oil trading on the NYMEX. WTI is priced at Cushing, Oklahoma, which is the delivery point for WTI oil futures contracts trading on the NYMEX. WTI Midland is the price of crude oil at the Permian Basin.

The WTI Cushing-WTI Midland spread reflects the pricing difference between a major production area and a major trading hub. The spread was $16.75 per barrel on July 30, compared to $15.62 per barrel on July 23. The spread increased by 7.2% from July 23 to July 30.

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WTI Cushing-WTI Midland crude oil spread 

WTI Cushing-WTI Midland spread hit its highest level since August 2014 on July 30. The rising Permian crude oil production and the insufficient pipeline capacity to move crude oil out caused the spread to increase. WTI Midland was trading ~$21.59 per barrel lower than Brent crude oil on July 30. Brent is the international crude oil benchmark.

Lack of takeaway infrastructure, apart from widening the WTI Cushing to Midland spread, could also limit oil production growth in the Permian Basin. Some of the energy producers operating in the Permian Basin are Pioneer Natural Resources (PXD), Apache (APA), Cimarex Energy (XEC), Diamondback Energy (FANG), and Concho Resources (CXO). These stocks rose 2.8%, 2.3%, 1.4%, 1.0%, and 0.6%, respectively, on July 30.

The Brent-WTI Midland spread reached $23.11 per barrel on May 31, which was its highest level since August 2014. However, WTI Midland was trading at ~$21.59 per barrel lower than Brent on July 30. A drop in the Brent-WTI Midland spread would reduce Permian oil producers’ price disadvantage compared to international oil producers.

Next, we’ll discuss the global crude oil supply outage.

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