The odd spread: While our oil model has been good at forecasting major turns in the oil price and as a result continues to be well ahead of spot price returns since inception, it has not been so great at modelling the Brent-WTI spread, which has moved through $20 once more (Fig 3). This spread peaked on the 17th of October last year before collapsing on options expiry. We would say that as North Sea crude returns to normal and the overall supply picture remains extremely positive as even Iranian exports pick up, that this spread should come in line with further future spreads and forward refining margins down to $5-10.
Eoin Treacy's view The Brent – WTI crude oil spread continues to rally back to test last year's high in the region of $25. While somewhat overbought in the short term, a clear downward dynamic would be required to question potential for additional upside.
Brent crude oil has held mostly in the region of $115 for more than a week but a sustained move above $120 would be required to suggest a return to medium-term demand dominance.