Crude oil spreads explained
An unexpected drop in US inventories and high refinery utilization rates have helped decrease the spread between WTI and the international Brent crude prices, which hit a low of $4.15/barrel last week. The spread between WTI and Brent normally peaks in winter when refinery utilization rates tend to be below average.
In contrast, the Heavy Oil Discount - or spread between WTI and WCS - has been rising in July. The spread is normally low in summer due to high demand from Gulf Coast refineries (since gas prices tend to peak during the summer driving season). However, the abnormally high spread is causing US refiners to take advantage of this heavy oil discount and run their facilities at maximum output. Refinery utilization rates are at their highest level since 1989.