Brent crude and other U.S. grades of oil haven't mirrored the plunge at all. The spread between Brent crude and WTI futures continues to widen, hitting a fresh, all-time high above $21 in Monday's session.
WTI crude futures fell to below $97 a barrel on Monday, while Brent crude futures held steady, above the 50-day moving average of $118.30 in electronic trading in the late afternoon.
On the supply side, excess crude inventories in Cushing, Okla. — the delivery point for Nymex crude futures — have been pressuring the price-per-barrel of oil.
A report from BENTEK forecasts crude oil production in the U.S. mid-continent is on pace to increase 60 percent by 2016, reaching 1.4 million barrels per day. Meanwhile, many traders point to production problems in the North Sea resulting in tighter supplies as a key support for Brent crude prices.
However, not everyone is attributing the record spread to global supply and demand. PetroMatrix analyst Olivier Jakob warns that Brent is falling into investment overdrive. "We cannot relate the increase of the Brent premium to WTI to other relative values or to the global supply and demand," Jakob said.
"Our general sense is that we may be seeing more of a rotation by money managers who are building further long positions in Brent as they roll out of WTI positions," said CitiFutures energy analyst Tim Evans.
Recent CFTC data showing a decline in net long positions in WTI futures by money managers last weeks underscores his point that traders appear to be buying what's strong and selling what's weak.
Evans says the spread simply reflects momentum trading. CME Group and ICE data show trading volumes from WTI contracts fell 23 percent in May vs. the same month a year ago, while Brent crude trading volumes were up 14 percent.
So where will oil prices go from here? Jakob says Brent crude prices remain technically strong, remaining above the 50-day moving average of $118.30.
But after falling below several key levels in Monday's session, traders say July WTI futures are poised to test $95 and a break below that could cause WTI oil prices to fall toward $90.
If gains in Brent hold up, the spread vs. WTI will continue to widen into uncharted territory.