Spot crude price backwardation in Cushing, Oklahoma, reached its steepest level this week since November, as prompt premiums grow with US officials and some shale producers expecting tighter supplies for the rest of the year.
The prompt Argus WTI premium to the CMA Nymex assessment rose yesterday to a 95¢/bl weighted average, its highest since November 2022. This differential represents the physical crude price premium for Nymex-quality WTI crude, or Domestic Sweet (DSW), in Cushing to the Calendar Month Average of prompt futures settlement prices during the delivery month.
Trades today were reported at premiums between 80-95¢/bl, down from Wednesday's weighted-average.
The September Argus WTI differential to CMA Nymex reflected the September-delivery DSW physical spot market premium for DSW in Cushing to a combination of October and November Nymex WTI futures, the prompt contracts during the calendar month of September.
The US Energy Information Administration (EIA) raised its Nymex WTI price forecast for full-year 2023 by 4.5pc to $77.79/bl in its August Short Term Energy Outlook released on 8 August.
Although the most recent EIA data showed a 5.9mn bl gain in commercial crude stocks for the week ending 4 August, US commercial inventories had fallen by a record 17mn bl in the prior week ending 28 July.
Extended Saudi output cuts and increasing global demand are expected to further reduce inventories and support higher crude prices, the EIA said.
US shale producers are also expecting a tighter back half of the year. Low crude inventories, high refinery utilization and Opec+ supply cuts should "further reduce inventory levels and place upward pressure on pricing through year-end," EOG chief executive Ezra Yacob said on an earnings call with investors on 4 August.
Shale producer Pioneer Natural Resources is also expecting inventories to fall in the second half of the year. Pioneer chief executive Scott Sheffield expects oil prices in the $80-100/bl range for the remainder of 2023.
