Brent-WTI Crude Oil spreads have fallen in the past few days to $10 per barrel, a level last seen in December.
Barclays Research points out that strong US refining margins and low product stock cover in the OECD could push WTI prices even higher in the coming weeks as the US continues exporting high levels of light products.

Adverse weather in US caused a rally in natural gas, power and oil products as heating demand surged, raising concerns about ample inventories in the coming months. The International Energy Agency's (IEA) bullish report and the start of TRanscanada's Market link Pipeline also helped WTI strengthen against Brent crude.

The market’s focus is likely to turn to the impact of refining turnarounds in 1Q and 2Q 14 on crude and product stock cover.

"The reported low levels of OECD crude and product stocks at the end of 2013 were equally bullish bellwhethers for forward balances given the remaining winter months and impending refinery turnarounds. The IEA’s Oil Market Report indicated declines in oil stocks from October to November, in some cases to
levels below 5-year averages. OECD European product stock cover fell to more than three days below the 5-year range in November, in contrast to closely tracking the low end of the range since May. On an absolute basis, OECD middle distillate and gasoline inventories were much worse off at the beginning of 2014 than in 2013," Barclays report said.

Strong US refining margins and low product stock cover in the OECD could push WTI prices even higher in the coming weeks. As for Cushing, OK crude stocks have declined, the shape of the WTI curve has flipped back into firm backwardation in the front months. Barclays does not expect this to change amid refining turnarounds and forecasts of around 1 mb/d of new oil production.
Source: Barclays Research