(EnergyAsia, March 15 2013, Friday) — Brent crude’s premium over US WTI will weaken over the course of 2013 but stay above US$10 a barrel, predicts US energy consultant ESAI.
WTI will strengthen as “long-awaited pipeline and rail takeaway capacity in the US midcontinent promises to reduce crude oil inventories in Cushing at some point in 2013,” said ESAI in its latest Monthly Global Crude Oil Outlook.
Nevertheless, the Brent-WTI spread will remain above US$10 on account of supply disruptions in Libya, production outages in Sudan, Yemen, and Syria that have kept the North Sea crude well-supported on the international markets.
ESAI said Brent commands an additional US$5 premium as a result of the on-going Western sanctions on Iranian exports and the scramble by countries all over the world to find substitute barrels.
“Finally, there is what one might call a trading variable that encompasses factors such as very high stocks in Cushing, changes to pipeline plans and the further shift in open interest from WTI to Brent. This last premium is the least durable,” it said.
“The Brent premium will come down by the end of 2013 first as the trading variable dissolves with more takeaway capacity and lower stocks, and then as the disruption and embargo premiums conflate, depending on world events.”