NEW YORK, Feb 3 (Reuters) - Oil stocks at the Cushing, Oklahoma, U.S. storage hub are expected to have dropped by more than one million barrels for the first time in five months, two market sources said on Monday, citing a report from energy industry intelligence provider Genscape.
Stocks at Cushing, the pricing point for the U.S. oil futures contract, fell by 1.3 million barrels last week, these sources said, citing the Genscape report. That would mark the largest draw since U.S. government data showed a 1.83 million barrel drop in August.
Genscape declined to confirm the report.
The news earlier in the session forced the spread between Brent and West Texas Intermediate (WTI) crude, the grade of oil that underpins the U.S. oil futures contract, to $8.06, to its narrowest since Oct. 18.
The tightening spread may nod to a market beginning to absorb and integrate that the pipeline has started to deliver oil supplies arriving at Cushing, said Stephen Schork, editor of the Schork Report in Villanova, Pennsylvania.
“These are real economics taking place. The market is trying to normalize right now.”
WTI has largely been landlocked for the last three years, trading at a steep discount to Brent - as high as $19 as recently as November.
But the spread has incrementally narrowed from $15 at the beginning of this year as traders anticipated new pipeline infrastructure coming online would relieve the glut of oil that has pooled at Cushing.
TransCanada Corp late last month announced that it had begun delivering crude oil on the southern leg of its Keystone pipeline. The 700,000 barrels-per-day line had largely been expected to drain oil delivered to storage tanks at Cushing to U.S. Gulf Coast refineries.
The spread between Brent and WTI rose on Monday above the 200-day moving average of $8.39 for the first time since Nov. 8. (Reporting by Jeanine Prezioso, editing by G Crosse)