Aug. 21 (Bloomberg) -- The widening spread between U.S. and European crude is “not sustainable” as falling inventories at the storage hub in Cushing, Oklahoma, will bolster the price of the nation’s benchmark oil, Goldman Sachs Group Inc. said.
The bank, which said its earlier recommendation to buy West Texas Intermediate crude has made a loss of 10.8 percent, recommended investors buy WTI futures for delivery in June 2013, and sell those for Brent in anticipation that a pipeline from Cushing to the U.S. Gulf Coast will help reduce surplus inventories. WTI is at a discount of about $17.50 to Brent today, compared with $15 a month ago. WTI’s discount to Canadian grades will also discourage the import of crude that led to a build-up this year at Cushing, Goldman Sachs said.
“We continue to believe that the WTI-Brent spread will tighten significantly,” David Greely, a New York-based analyst at Goldman Sachs, said in an e-mailed report. “With WTI now pricing near parity or below Canadian grades, we expect flows into Cushing will slow, accelerating the draw on Cushing inventories and putting greater upward pressure on WTI prices.”