Why WTI Is Suddenly Trading $12 Below Brent

Global oil markets tightened unevenly this week, driving a notable divergence between international and US benchmarks. ICE Brent held firm while West Texas Intermediate sank to about $12 a barrel beneath Brent, a gap traders attributed to rising freight and insurance costs, plus fears that US refiners could cut runs. Overall crude benchmarks are on track for a modest weekly gain of around 2%, but WTI is facing steeper losses near 7%.

Several geopolitical and logistical developments are underpinning the repositioning of flows. Sources say US and Iranian negotiators have been exploring a phased deal that would see the Strait of Hormuz reopened in return for a rollback of sanctions measures — a development that could ease some supply-side risk if realized. At the same time, Russia’s Rosneft has begun commercial loadings from its new Sever Bay terminal for Vostok Oil, initially at about 150,000 b/d with plans to scale toward 600,000 b/d by late 2027, creating alternative Arctic export corridors.

Market participants are also focused on costs tied to shipping and security. Regional freight rates and war-risk premiums have surged — for example, insurance surcharges for tankers linked to Saudi Arabia’s Yanbu port reportedly climbed to roughly 3% of a vessel’s value, up from under 1% in early July — complicating efforts to restore Red Sea export capacity. Iraq also blamed a large tanker purchase for pushing regional transport costs higher, a claim Riyadh denied.

Supply-side moves and policy risks are intensifying pressure on European and US buyers differently. The EU has warned about a potential 90-day US diesel export ban that could squeeze European buyers amid a roughly 700,000 b/d deficit and the long-term closure of 11 major refineries over the past decade. New Delhi’s state refiners are increasing term US LPG purchases by more than 25% to about 2.76 million tonnes in 2027 as they diversify away from disrupted Middle Eastern suppliers. Meanwhile, disruptions at Libya’s El Sharara field — now operating near 120,000 b/d after a reported valve closure — add to near-term supply uncertainty.

Taken together, these developments help explain why Brent has outperformed WTI: rising shipping and insurance costs, shifting export corridors, and the prospect of US policy actions on diesel have materially worsened the outlook for US crude demand, even as other global flows adapt to the changing risk landscape. (Reporting based on an Oilprice.com roundup by Tom Kool.)