December WTI Brent arb

The December WTI futures have risen to their best value vs December Brent futures today-testing $3.00.

The narrative remains that WTI stockpiles at the Cushing, OK delivery site are dwindling to a level that almost impairs the operations at the site. Today Cushing stocks fell to 22 MMBL. The accepted knowledge in the industry is that a minimum of 20 MMBBL is needed at the facility.

U.S. crude stockpiles at the key Cushing, Oklahoma storage hub are at their lowest in 14 months due to strong refining and export demand, prompting concerns about the quality of the remaining oil and the potential to fall below minimum operating levels, traders and analysts said," as per Refinitiv reporting. "If you let the crude (level) drop too low, the crude can get sludgy and you can't get it out. What does come out - you won't be able to use," said a sales director at energy consultants Wood Mackenzie. High interest rates also have pushed up the costs for storing oil, encouraging outflows, Refinitiv adds.

It seems that only a prolonged maintenance schedule by US refiners and or a reduction in the level of U S crude exports/ and or increase in US crude imports would be able to allow the amount of oil stored at Cushing to rise in any significant way. Those prospects seem somewhat dim. The maintenance schedule is seen peaking in mid-October, as per IIR Energy consultants.

Technically price action and momentum favor the WTI gaining further on Brent. The only negative for now is that the spread is trading above the upper bollinger band on the December daily chart. That value lies at about $3.35 currently. If WTI were to weaken vs Brent, we see support for the WTI at the $3.58 area. Below that we see support at the $3.78 area. The Daily Continuation chart for the WTI/Brent arb shows prior highs at $2.76 and then further resistance in the $2.15 area.

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