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(Bloomberg) — US oil is trading at the deepest discount to the global Brent benchmark in 15 months as geopolitical developments from Venezuela to the Black Sea shake up supply flows around the world.
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The spread between Brent and West Texas Intermediate — or the difference in price between two of the world’s key crude markers — widened to as much as $4.68 a barrel on Wednesday. That would mark biggest relative discount on US oil since October 2024, when a series of tit—for-tat attacks between Iran and Israel threatened the oil-rich region’s energy infrastructure and shipping lanes.
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The price relationship between the US and global crude benchmarks is a closely followed gauge that forms the basis for hundreds of millions of dollars worth of shipments and trades every day.
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The sharp change in relative prices has been driven by several key factors — curtailed European exports amid disruptions at the Caspian Pipeline Consortium terminal that loads Kazakh oil into tankers, mounting unrest in Iran and US markets bracing for an influx of Venezuelan crude.
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Europe’s oil market has strengthened dramatically, with reduced shipments from Kazakhstan and elsewhere tightening supply. Smaller flows of Kazakhstan’s CPC Blend, as well as disruptions in Libya and some North Sea fields, have pushed up physical prices in the North Sea and Mediterranean. At the same time, as many as 50 million barrels of Venezuelan oil are set to hit the US Gulf Coast and bolster domestic stockpiles.
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The prospect of US military action in Iran amid protests against the regime is also providing upward pressure to Brent prices, with reports that some personnel have been advised to leave an American airbase in Qatar. Disruptions in the Strait of Hormuz, a vital route for global oil shipments, could upend supply from Iran and around the world.
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The spread will likely remain elevated until the unrest in Iran ceases, according to Dennis Kissler, senior vice president for trading at BOK Financial.
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That could lead traders to explore arbitrage opportunities and boost US exports as cheaper prices make American oil more attractive to foreign buyers.
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