West Texas Intermediate and Brent crude oil

The spread between West Texas Intermediate and Brent crude has widened to around $3.50. The divergence is crucial because WTI’s discount to Brent can shift trade balances. When the spread hits $4, that typically makes the U.S. benchmark too cheap for international refiners to ignore and covers the cost of overseas transportation and storage. At the same time, American refiners tend to stop buying international crude, and the EIA can draw on its inventories.

All of this can shift trade balance dynamics at a time when U.S. exports have slowed. This move is happening as traders price in a premium for Brent due to Russia-related risk as preparations ramp up for a possible Russian invasion of Ukraine. The spread previously widened in August thanks to an improving global virus situation and increasing Chinese demand. That placed international benchmarks at a premium, only to reverse in light of European energy issues.