Why WTI Crude Is Trading Above Brent As Oil Markets Price Short‐Term Supply Risk

(MENAFN- Khaleej Times) Oil markets plunged on Wednesday morning as investors heaved a sigh of relief with the announcement of a ceasefire in the Iran conflict.

US crude futures down around 15% to $96.31 a barrel, while Brent futures also slid 13% to $94.71 per barrel.

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Within this scenario, the global oil market has been witnessing an unusual disruption to its long‐standing pricing hierarchy, with US benchmark West Texas Intermediate (WTI) crude at times trading above Brent, the world's primary seaborne oil benchmark.

The reversal, driven by extreme backwardation and short‐term supply tightness, marks a sharp departure from historical norms, where Brent typically commands a premium of $2–$5 a barrel. Over the past five years, Brent has traded on average $4.02 higher than WTI.

The shift has been striking. Early last week, Brent was trading at a premium of more than $12 over WTI as heightened geopolitical tensions in the Middle East - particularly around Iran and concerns over the safety of the Strait of Hormuz - pushed up prices for seaborne crude.

“Historically, Brent trades higher because it reflects global supply risks and geopolitical premiums linked to seaborne oil flows,” said Vijay Valecha, chief investment officer at Century Financial.“At the start of last week, escalating tensions in the Middle East meant Brent reacted far more sharply than WTI, which is tied to landlocked US supply.”

However, market dynamics changed rapidly. WTI prices surged and briefly moved as much as $2.5 a barrel above Brent, with both benchmarks now trading in a narrow range around $110–$112 a barrel.

Analysts say the apparent inversion is being driven by short‐term market distortions rather than any structural shift. Madhur Kakkar, founder and chief executive of Elevate Financial Services, said one key factor is contract timing, which has temporarily skewed price comparisons.

“WTI usually trades at a discount to Brent because Brent is a seaborne global benchmark, while WTI is priced at Cushing, Oklahoma,” Kakkar said.“That normally gives Brent a logistics and export premium. But when supply disruptions are concentrated in waterborne routes, and contract rolls are out of sync, that relationship can temporarily reverse.”

WTI is still trading its May contract, which expires on April 17 and reflects immediate supply conditions, while Brent has already rolled to its June contract, expiring on April 29. This mismatch has distorted the headline spread, making WTI appear more expensive in the short term.

Ole Hansen, head of commodity strategy at Saxo Bank, said the move is also being amplified by extreme backwardation and acute tightness in the prompt market.

“WTI above Brent is a timing and curve effect, not a structural inversion,” Hansen said.“The market is pricing immediate scarcity over forward normalisation.”

Both benchmarks are trading in steep backwardation, with front‐month contracts commanding record premiums over deferred delivery. Prompt WTI has surged to around a $15‐a‐barrel premium over June, while physical Brent cargoes traded above $141 ahead of the Easter period, highlighting the extent of near‐term supply stress.

Trump-era rhetoric warning of prolonged disruption to the Strait of Hormuz has reinforced demand for immediately deliverable barrels, further lifting prompt prices, Hansen added.

Kakkar said WTI has also benefited from strong international demand for US crude, which is seen as a reliable alternative outside conflict zones, as well as from its lighter, lower‐sulphur quality, making it more cost‐effective to refine during periods of supply tightness.

Analysts stressed that the current near‐equality between Brent and WTI should be viewed as exceptional rather than a new normal, with price spreads historically tending to mean‐revert once geopolitical risks ease and market conditions stabilise.

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