The differential for WTI at East Houston (WTC-MEH) versus U.S. crude at the Cushing storage hub eased to its lowest in more than two and half years on Wednesday on weak export demand and backwardation in markets, dealers said.

WTI at East Houston eased to a 15-cent premium as the Brent/WTI spread narrowed to as little as minus $3.08. A narrower spread, particularly under minus $4, cuts exports as it is less attractive for foreign buyers to purchase U.S. crude.

WTI Midland (WTC-WTM) fell 15 cents to a midpoint of a 10-cent premium.

Backwardation for U.S. crude has widened in recent days, meaning investors are not incentivized to store crude.

Medium sour grades such as Mars remained firm as refiners ran more crude to keep up with summer driving demand. Further boosting prices for medium sour crudes were lower supply of heavy Canadian crude as a result of wildfires, and of Venezuelan crude as a period granted by Washington to wind down purchases expired in late May.

U.S. oil refiners are expected to have about 228,000 barrels per day of capacity offline in the week ending June 20, increasing available refining capacity by 40,000 bpd, research company IIR Energy said on Wednesday.
Source: Reuters