The Brent's premium to WTI widened to record intraday levels Friday as Brent continues to be driven higher by tight supplies in the North Sea as its front-month contract is set to expire at day's end.
The front-month Brent/WTI premium traded to more than $28/b in early morning US trade and was around $27.50/b near the afternoon.
The size of the premium was nothing more than Brent futures continuing to lead the gains in the oil complex, said Tom Bentz, director at BNP Paribas Prime Brokerage.
"There are a lot problems in the North Sea with the force majeure on the Forcados crude and we still don't have enough Libyan crude in the market," Bentz said.
Also, the report of the first build in crude stocks at Cushing, Oklahoma -- home of the NYMEX contract's delivery point -- in about 11 weeks has kept NYMEX front-month crude futures in check, he said.
Cushing stocks rose 532,000 barrels to 30.621 million barrels for the week to October 7, according to data released Thursday by the US Energy Information Administration. Since April, Cushing stocks have fallen some 11.3 million barrels from a high of 41.869 million barrels.
Jacob Correll, commodity analyst at Summit Energy Services, said the tight supply situation in Europe was leading to higher imports into that region.
"Since the Brent market is a seaborne market you will see more arbitrage opportunities and more volume heading to Europe if need be," he said. "That is why we are seeing less imports into the US because more is needed in Europe and Asia."
Even if more supplies are heading to the region, the Brent futures market was also given a boost by news earlier in the week that the Dow Jones-UBS Commodity Index will add Brent crude to its index starting in 2012.
"There has been a lot of upside momentum in Brent and even if we see a pullback in the [Brent/WTI] spread it's not likely to go below $20 anytime soon," Bentz said.
Any real change in the spread where WTI would move more into parity with Brent depends more on pipeline reversals in the US where supplies can easily be moved out of Cushing, Bentz said.
"Pipeline reversal is the way we will see WTI become more competitive with Brent and that won't likely happen for another two years," he said.
November Brent futures rose most in the oil complex on Friday on renewed optimism over stability in the eurozone and a rally in the euro, analysts said, while bullish US economic data also lent support.
NYMEX November crude was $2.22 higher at $86.42/b, while ICE November Brent was up $2.86 at $113.97/b by 11:39 a.m. EDT (1539 GMT).
NYMEX heating oil was up 8.07 cents at $3.0519/gal and November RBOB was 5.45 cents higher at $2.8120/gal.
The market remains bullish after a morning meeting in Paris between group of G20 and International Monetary Fund officials who said the fund may increase its lending resources to help stem the European debt crisis.
Also adding underlying support to the oil complex was better-than-expected US retail sales data, which showed a 1.1% monthly gain in September to $395.5 billion, and a 7.9% gain from a year earlier.
