Western crude gets too cheap

Commentary summary: 

• We remain more bullish Brent vs Dubai with WoS crude cheap in Asia.
• A miniature glut of light crude has formed in Europe though medium crude remains well-supported.
• WTI/Brent may even widen further with the Brent leg to be supported and US commercial inventories on the rise. Cheap WTI in Asia sets the WTI floor.
• Global margins are now fairly stellar; Asia may hit the spot market harder than anticipated through TARs season, with plenty cheap WoS crude available and OSP hikes substantial.

Flat price has taken quite a hit over the last couple of weeks, at least partly related to global trade risks and, on the face of it, diminishing sanctions risk. Spreads cooled but seem to be stabilising around the 40-50c level for Brent, and weaker for Nymex WTI where US commercial stocks are on the rise. A nascent recovery in Brent/Dubai in late Jan was quickly snuffed out.