RPT-U.S. Oil boom offers a surprise to traders – and it's expensive | Energy and oil

(Repetition of the history of July 15 without change.)

* Overheating of the American oil pipeline network

* Bottlenecks send discounts unexpectedly

* "Whipsaw" Movement Doubles WTI-Brent to Over $ 11.50 [19659002] * US Now World's Second-Largest Petroleum Producer Behind Russia

By Julia Payne, Devika Krishna Kumar and Dmitry Zhdannikov

LONDON / NEW YORK, July 15 (Reuters) – The world's largest oil traders have surprisingly doubled the price discount of US light crude for the Brent WTCLc1-LCOc1 index in a month, while soaring production in the United States is skewing the market.

The trading offices of BP oil and merchants Vitol, Gunvor and Trafigura recorded losses of several tens of millions of dollars each following the operation "badsaw" which reached more than $ 11.50 on barrel in June. with their performance told Reuters.

The sources did not give specific figures on the losses, but they said that they were sufficient for Gunvor and BP to fire at least one trader each.

The companies declined to comment, and none of them publishes the details of their individual trading books.

It highlights the challenges of WTI futures trading, the benchmark for US crude oil, while US storage and pipeline infrastructure rises above Saudi Arabia. producer behind Russia.

"As an exporter of US crude, traders are naturally long wti and cover their wagers by shorting Brent." When spreads widen so wildly, you lose money. money, "said a senior executive of one of the four trading companies.

The WTI discount to Brent reached $ 11.57 per barrel on June 6, the widest in more than three years, while US production peaked and exceeded pipeline capacity as traders rushed to export. The reduction had been around $ 5 just a month before.

Betting on the price range, a popular market for oil markets, is based on predictions of price differences between European and US market fundamentals.

"WIDOWMAKER"

The surge in US production, now close to 11 million barrels a day (bpd) compared to less than 5 million bpd a decade ago, pushed up the spread. Until 2010, US crude traded mostly at Brent premium. But the growing availability of US crude oil means that it has almost always been cheaper since then.

However, it is the big sudden movements that tend to make victims of trade, sometimes earning the nickname "widow".

Since the outbreak of June, the spread has again been sharply reduced. The reduction in discount has been favored by a rise in the price of WTI due to an unexpected failure occurring at the Syncrude oil sands site in Canada, which can produce up to 360,000 bps. / j.

As a result of the shutdown in Canada, stocks last week at Cushing's delivery point for US crude oil futures dropped to their lowest level since December 2014, according to US data.

The volatility of the spread was only one of the many commercial risks that appeared in the first quarter of 2018.

Traders also had to pay heavy premiums to leave US storage leases because the structure of oil prices has shifted to backwardation, when short-term prices are higher than those of subsequent deliveries, it is not profitable to stock crude.

The escalating US production put pressure on the pipeline system, particularly in the Permian Basin, Texas, which contributed the most to the surge in production.

A bottleneck hitting the US crude in Midland, Texas WTC-WTM surprised BP and caused losses when the WTI haircut fluctuated sharply between April and June, according to four market sources and one source close to BP.

By the end of April, the rebate was close to $ 6 per barrel before rising to $ 13 on May 4. This rise was followed by a rebound of nearly $ 5 in the second half of May followed by a move in June.

Three BP traders took the pressure for Midland roller coaster losses. BP 's close source said that one of them had been fired and that two others had been reworked internally.