Goldman Sachs said Tuesday in a note that the WTI-Brent spread is expected to narrow in 2-H of this year.

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Goldman (NYSE:GS) sees WTI Crude Oil price closer to Brent price in 2-H of Y 2012

The WTI-Brent spread is the measure the price difference between the World’s 2 main Crude Oil benchmark prices.

Goldman Sachs said Tuesday in a note that the WTI-Brent spread is expected to narrow in 2-H of this year.

The Key spread has doubled from around $10.00 bbl at the end of January to more than $20.00 bbl in early April, with West Texas Intermediate (WTI) prices depressed by a rapid build up of inventories at Cushing, Oklahoma, delivery point for the main New York Merc Crude Oil contract.

The Goldman note said the scheduled reversal of the Seaway pipeline, expected to take place by 1 June, would eventually force the spread back in, as the Seaway will alleviate the bottleneck between Cushing and the U.S. Gulf Coast, a Goldman’s energy analyst said.

The analyst went on to say, “While we had expected the prompt WTI-Brent spread to narrow more quickly… we believe that a combination of factors have kept the WTI-Brent spreads wide in both the physical and forward markets, and we expect that the impact of most of these factors will dissipate with the opening of the Seaway pipeline.”

Goldman’s note said the spread could narrow toward $5.00 bbl by the end of the year, saying it would reflect the cost of “pipeline tariff economics”.

At 11:21 a.m. EST (1521 GMT), the WTI-Brent spread had narrowed by about 0.70 to 19.52 bbl, with Brent Crude Oil futures trading down 1.80 at 120.87 bbl, and US Crude futures were trading down 1.10 at 101.36 bbl.

Paul A. Ebeling, Jnr.

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Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels. Read the Terms of Service

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