Cushing, Okla. …There’s going to be a floody, floody...
Aside from a one-off related to the recent disruption to Canadian crude oil flows into the Midwest, the table is set for a material build in supplies at the NYMEX delivery hub in Cushing, Okla.
Last night (Monday's), the penultimate crude oil contract on the Nymex for delivery in October settled at a $1.33 discount (contango) to the November contract.
Since this time-spread went prompt in late August it has averaged a $1.18 discount. That is more than enough of an inducement to carry barrels, i.e., increase inventory by taking delivery of the October barrels, to deliver them against the November contract one month hence.
This event has created a large distortion with the corresponding Brent contract in London. Whereas Brent typically trades around $1.50 below the WTI contract in New York, the market in London has now been trading at a premium since the middle of August. Last night the November Brent settled at a $3.17 premium and has averaged a $1.31 premium since August 17th.