Brent oil holds near $118 as price spread to US WTI crude narrows

Brent oil futures open today’s trading session holding near $118 a barrel as the spread between Brent and US WTI crude, the North Sea and US benchmarks, narrowed to its tightest margin in 3 months yesterday on hopes that the oil glut around an important US delivery point would ease soon.

Latest Brent Oil Price

In London, Brent crude oil futures for June 2012 delivery was trading at $118.53 a barrel, 08.15 GMT today on the ICE Futures Exchange.

Brent to WTI Oil Spread

The Brent to WTI spread, which rose to as high as $21.91 a barrel at the start of this month, narrowed to just $13.63.

The spread was also affected by the decline in Brent to a two month low after Iran said on Monday it had agreed to further talks with western countries over its nuclear programme next month.

Goldman Sachs said the widening of the WTI-Brent spread was caused by a sharp fall in Canadian crude on the physical markets as inventories have risen sharply around ­Chicago.

This in turn caused more oil to flow from Chicago to Cushing, which then was shipped back to Wood River in Roxana, Illinois.

However, the bank added that, with the Seaway reversal easing the bottleneck at Cushing, WTI prices would rise closer to Brent prices in the second half of this year.

“I think it’s the big unwind of two markets, Brent and RBOB, that were out of proportion to the rest of the complex.” said a New York based trader.

Iran’s Nuclear Program

Also helping to cap Brent prices and reduce the premium to US WTI crude were Saturday’s talks about Iran’s nuclear program. The revived discussions with Tehran and major powers eased the threat of immediate supply disruptions in the region.

The specter of a regional conflict as Iran declined to curb its disputed nuclear program helped Brent prices surge to a 2012 peak above $128 a barrel in March, a 19 percent rise from the end of 2011.

Recovering Libyan oil exports and higher output from Saudi Arabia and Iraq helped check the price surge, along with the West mulling strategic reserve releases as governments around the globe fretted about the effect of high oil prices on economic growth.

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Brent oil holds near $118 as price spread to US WTI crude narrows