Baku. 4 August. REPORT.AZ/ The U.S. (WTI) crude may temporarily rise above global benchmark Brent next year as Middle East output expands while the nation’s supply boom fades, according to Bank of America Corp.
West Texas Intermediate futures, which have been at a discount to Brent for most of the past five years, may need to strengthen to attract imports as U.S. output falters, the bank said in a report dated July 31. Output from the Bakken and Eagle Ford shale oil formations is “rolling over in response to lower prices,” Iran plans to expand exports following last month’s nuclear accord and other OPEC members are also raising production, the bank said.
WTI slipped to a discount against North Sea Brent in 2010 as U.S. crude output started to reverse decades of decline. It traded for $4.73 a barrel less than the European grade at 11 a.m. on the London-based ICE Futures Europe exchange. Oil companies in the U.S. have made an unprecedented cutback in drilling after prices slumped to a six-year low, while cheaper fuel is stimulating the nation’s consumption of gasoline.
The news came as analysts at Bank of America Merrill Lynch warned the price of West Texas Intermediate (WTI) could rise above Brent crude by spring next year.
"Higher Middle East output combined with declining drilling activity in North America could reverse WTI-Brent dynamics in 2016," they said.
"With shale output dropping, US refiners may have to import light crude again to keep up with robust gasoline demand growth. Consequently, WTI may have to temporarily trade above Brent next spring to attract foreign light sweet crude into the US."