Brent crude sags, while lower Canadian supply boosts U.S. futures

Global Stock Markets

Brent crude oil prices fell on Tuesday, pulled down by a stronger dollar and a bout of profit-taking, while U.S. futures gained, bringing the discount between the two key futures contracts to a six-month low.

Brent crude futures fell 73 cents from Monday’s close to $64.94 a barrel by 1017 GMT, while U.S. West Texas Intermediate (WTI) crude futures were up 20 cents from their last close on Friday at $61.88 a barrel. 

Reduced supply from Canada to the United States caused by pipeline reductions were supporting WTI, traders said. 

Brent is trading at a premium of less than $3 a barrel to WTI , down from over $$7 at the start of the year. 

A narrower premium of Brent to WTI means it is also less attractive for consumers in north-west Europe to import U.S. crude, especially with refiners conducting maintenance. Premiums for local North Sea grades are at multi-month lows. 

Logistical constraints in the United States have even caused prices for regional grades to diverge. [CRU/C] 

Louisiana light sweet crude is trading at a premium of around $2 a barrel to WTI, down from nearly $5 a month ago. 

Overall, oil markets remain supported by supply restraint on the part of the Organization of the Petroleum Exporting Countries (OPEC), which started last year to draw down excess global inventories. 

Saudi Arabia - not least in an attempt to give the planned listing of its state-owned oil giant Saudi Aramco a boost - wants Russia and other producers to keep withholding supplies to prop up prices. But soaring U.S. production is threatening to erode those OPEC’s efforts. 

Last week, the number of U.S. oil rigs drilling for new production rose for a fourth straight week to 798, an indication that U.S. crude output, already at a record 10.27 million bpd, may rise further.