There have been three main reasons that have put pressure on the spread. Firstly, US demand had been lagging behind the emerging markets, whose imports are more likely to be priced on a Brent basis. Secondly, Cushing continues to be constrained by its landlocked location.

Thirdly, the flow of investment money is shifting from WTI to Brent.

Since April 2010, Cushing crude inventories have remained at historically high levels. Our storage model suggests the build in Cushing inventory is also set to continue, given the positive return on storage for WTI. In addition, the Phase Two of the Keystone project is expected to come into operation during Q1 this year. It will increase the crude pipeline capacity from Canada to Cushing. According to the DOE, Cushing has a storage capacity of 45.8mb as of 30th September 2010, versus the current 36.6mb current inventory level. However, it has been reported that Cushing capacity should be as high as 56mb.

Eoin Treacy's view In addition to the reasons for the widening of the Brent - WTI spread proposed above, this article from FTAlphaville suggests that a switch from WTI to Brent by quantitative funds may also help to explain the divergence.

The spread has accelerated from $1.20 last October to $8.50 today and has become quite overextended as it approaches the 2008 peak near $10. The first clear downward dynamic is likely to signal a peak of at least near-term significance.

In absolute terms, Brent crude encountered resistance near $100 10 days ago and has now pulled back to test the short-term progression of higher reaction lows. However, a sustained move below the 200-day MA, currently near $85.50 would be required to question medium-term upside potential.

WTI crude has had a less consistent advance over the last few months and is currently pulling back, having encountered resistance above $90. It needs to hold above $80 if the medium-term upside is to continue to be given the benefit of the doubt.

Gasoline has occupied a position of leadership among the distillates but has now fallen to break its short-term progression of higher reaction lows. It will need to find support above or in the region of the 200-day MA, currently near $220, to sustain the medium-term bullish outlook. Heating oil's five month progression of higher reaction lows remains intact but considering the commonality across the sector, the 200-day MA now looks like a more important area of potential support.

Natural Gas remains within an inconsistent volatile range. While it has advanced over the last couple of months, it formed a large key reversal yesterday, below the psychological $5, and followed through today, suggesting scope for some additional downside.

This section from a Bloomberg article responding to a Saudi comment on its spare supply may also be of interest:

"These comments indicate that the Saudis find increasing discomfort as oil approaches triple digits," said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. "It's not due to supply tightness that we have $90 to $100 oil. We do have a well supplied market today, a lot of inventories, a lot spare OPEC production capacity."

Oil above $100 begins to become a political liability and with the CFTC investigating the role of speculators in the commodity markets, some traders are inclined towards profit taking at this stage. The oil complex has hit at least near-term peak. Industrial and precious metals are showing similar signs of profit. The risk a reversion towards the trend mean, represented by the 200-day MA, has increased, particularly for the more overextended commodities in the agricultural sector.