On November 19, Brent crude oil January futures settled ~$9.6 higher than the WTI crude oil January futures. On November 12, the spread was at ~$10. Between November 12 and November 19, Brent crude oil January futures fell 4.7%, which was ten basis points less than the fall in WTI or US crude oil January futures.
In the past five trading sessions, the United States Brent Oil ETF (BNO) has fallen 3.2%, 50 basis points more than the fall in the United States Oil ETF (USO). BNO tracks Brent crude oil futures, while USO follows US crude oil futures.
The rise in US crude oil production discussed in part two might be behind the marginal underperformance of US crude oil compared to Brent crude oil prices.
US crude oil exports
The above chart shows the broadly positive relationship between US crude oil exports and the Brent-WTI spread since December 2015. Exports seem to follow the Brent-WTI spread with a lag. When the US lifted the ban on US crude oil exports in December 2015, US crude oil production started rising. US crude oil production rose ~27.5% to ~11.7 MMbpd (million barrels per day) in the week ending November 9.
In the same week, US crude oil exports declined by ~0.36 MMbpd to ~2.1 MMbpd. However, US crude oil exports rose by ~0.9 MMbpd year-over-year. If the Brent-WTI spread expands due to further possible upside in US crude oil production and a possible OPEC and non-OPEC oil producers production cut deal, as we saw in this series, US crude oil exports could benefit.
Brent-WTI spread and US energy companies
While a widening Brent-WTI spread is good for US refiners and US oil exporters, it’s a disadvantage for US oil producers selling in the US market. A narrowing spread has the opposite impact. On October 19, the Brent-WTI spread expanded to $10.72, the widest level since June 8. Between October 19–November 19, the Brent-WTI spread contracted by ~$1.1, while the VanEck Vectors Oil Refiners ETF (CRAK) fell 7.5%.
Phillips 66 (PSX) and Valero Energy (VLO), which account for ~16.5% of CRAK, have fallen 7.7% and 13%, respectively, since October 19. If the Brent-WTI spread moves lower, it might drag down these US refining stocks.