U.S. Oil at Widest Discount of the Year to International Crude
CNBC Senior Commodities Correspondent & Personal Finance Correspondent
The growing oil supply glut in the Midwest and the inability to transport and offload these supplies via pipeline to refineries along the Gulf Coast has created the widest price differential of the year between the world's largest oil futures contracts.
U.S. oil prices are more than $20 a barrel lower than North Sea Brent crude futures, the steepest discount since late December.
U.S. oil futures fell over $1 per barrel to an intraday low of $95.04 a barrel in Wednesday's session but recovered to trade above $96 in afternoon trading. While Brent crude futures pulled back only slightly from a four-and-a-half month high to trade just below $117 a barrel for most of the morning. (Read More: Consumers Taking Financial Hit From Rising Fuel Prices)
The price differential or "spread" between Brent and U.S. oil prices is expected to continue to grow as long as the U.S. and Canadian oil production boom continues and pipelines are unable to get the growing amount of supply to U.S. refineries.
Oppenheimer & Co. energy analyst Fadel Gheit said, "The incredible growth in unconventional resources in North America — shale in the U.S. and oil sands in Canada — and lack of pipeline capacity to take oil to where it can be refined" could result in the discount of U.S. oil to Brent crude futures surpassing last year's high of $23 a barrel.
The spread between two of the world's largest oil contracts has climbed 23 percent in just the past six days, after an announcement last week of operational difficulties on the Seaway pipeline, which takes crude oil from Oklahoma to the U.S. Gulf Coast. (Read More: Oil Bulls Remain in Charge for Now)
-By CNBC's Sharon Epperson; Follow her on Twitter: @sharon_epperson