Brent and WTI Crude Prices Squeezed by Contrasting Drivers
The crude oil market is experiencing a squeeze due to conflicting drivers that are widening the spread between Brent and WTI futures contracts. On one hand, President Trump's rejection of Iran's ceasefire proposal has provided support for crude prices. However, speculation about a potential US diesel export ban has put downward pressure on WTI.
The premium for Brent over WTI has widened to around $13 per barrel, with the difference between the two contracts growing by more than $9 per barrel since September 18. This divergence in drivers is attributed to the fact that if US refiners are restricted from exporting diesel, they will process less crude, resulting in weaker refinery demand for WTI relative to Brent.
US highway diesel prices have surged to a record high of $6.53 per gallon, up 42.6% since July 10, putting pressure on Trump and Republican members of Congress ahead of the November 3 midterm elections. The outcome of Trump's scheduled announcement from the Oval Office at 2:00pm ET today is uncertain, but it could have a significant impact on the crude market.
WTI prices are currently trading around $93.60 per barrel, with some analysts expecting a breakout above or below this level. However, the medium and longer term outlook for crude remains bearish due to the potential for increased supply if the conflict were to end and global supply threats fade.