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Different Fundamentals Lead to Disparity in Performance of WTI & Brent Grades

September 21, 2018 at 20:31 by Vladimir Vyun

West Texas Intermediate crude oil rallied today, while the Brent grade stayed little changed. The disparity in performance between the two grades of oil can be explained by fundamentals that were different for WTI and Brent.

Baker Hughes reported that the number of US oil rigs fell by one to 866 last week. While US drillers were increasing the number of rigs previously in anticipation of higher prices, currently the growth stalled. The Permian region in western Texas and eastern New Mexico was especially notable for the lack of growth due to insufficient pipeline infrastructure for transporting oil. The Energy Information Administration predicted that the US biggest oilfield will rise by 31,000 barrels per day  — the slowest rate of increase since 2016.

The Organization of Petroleum Exporting Countries and its allies will meet in Algeria on the weekend to discuss production cuts. While the OPEC, Russia, and some other non-OPEC producers agreed to cut oil production back in 2016 to support prices, Reuters reported, citing sources familiar with the matter, that the participants of the agreement are going to increase output by 500,000 barrels per day. It should be a response to lower exports from Iran due to US sanctions against the Middle Eastern nation.

November contract for delivery of WTI crude oil advanced 0.6% to $70.74 per barrel as of 19:41 GMT on NYMEX today. Brent crude, on the other hand, traded almost unchanged at $78.65 per barrel on ICE.

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