The price gap between the world's two most-important crude-oil benchmarks shrunk to its narrowest in more than three months Monday, as an expanded U.S. oil pipeline looks set to help relieve a domestic oil-supply glut.
The difference between U.S.-traded West Texas Intermediate crude oil and Europe's Brent crude stood at $18.21 Monday, the narrowest since September.
The price spread has shrunk by 6.4% since the beginning of this year, due in large part to the announcement by pipeline operators Enterprise Products Partners LP and Enbridge Inc. (ENB) that 400,000 barrels a day of oil will begin to flow through their Seaway Pipeline by the end of this week.
The pipeline, which initially transported 150,000 barrels a day and was reversed earlier this year, transports oil from the oil-transit hub of Cushing, OK, to Gulf Coast refineries. Investors are betting that the pipeline will help lower record oil stockpiles in Cushing and raise the price of U.S. crude against its European counterpart.This is not trivial.