Changes in the international crude oil market used to have a more tangible impact on ICE Brent than on CME WTI contract. After all, the European benchmark was deemed to be the truly international crude oil marker. Consequently, money managers favored Brent over WTI as an investment tool on a frequent basis. This adage seems to be changing as displayed on the chart above. Net speculative length (NSL) in CME WTI surpassed that of ICE Brent last week for the first time since the end of May and this reversal was understandably coupled with the narrowing of WTI’s discount to Brent. Judging by developments in the physical markets, this advantage could be maintained in the foreseeable future.

Firstly, crude oil stockpiles at Cushing, Oklahoma, the delivery point of the CME futures contract, reached a 14-month low at the end of September. Inventories at this crucial hub fell to 22 million bbls during the week ending September 26. The U.S. refinery maintenance period might lead to a stock build at this crucial location (and nationwide), nonetheless no protracted swelling of crude oil inventories is anticipated for three reasons.

U.S. shale production, which recovered impressively from the pandemic-induced devastation, is peaking, according to the EIA. It is expected to drop slightly in October for the third successive month. This should not come as a surprise because U.S. oil rig counts have fallen from 618 at the beginning of the year to 502 by the end of September. Shale producers prioritize dividends over capex.

The pivotal catalyst for the revival of WTI’s fortune, however, is the inclusion of WTI Midland into the Brent basket effective June 2023. It has provided a timely boost for U.S. crude oil exports, which, at 4 mbpd, is averaging 500,000 bpd over 2022 and one mbpd above 2021. Ever since the introduction of the U.S. grade into the Brent basket it has taken the leading role at setting the daily price of the European marker as it is frequently the cheapest one in the mix. It is yet another example of the growing importance of WTI, which has gained a genuine global status, something that is unmistakably exhibited on the chart above.