The North Sea Premium Surge: Seizing the Forties-WTI Spread Opportunity Before Time Runs Out

The widening chasm between North Sea Forties crude and U.S. WTI Midland futures has created a rare, time-sensitive arbitrage opportunity in June 2025. Driven by structural imbalances in global oil markets, Forties' premium over Midland has surged to over $0.80 per barrel, with bid-ask spreads narrowing as expiring contracts force liquidity into a "now or never" window. For traders, this is a high-conviction moment—but the clock is ticking.

The Structural Shift in the Dated Brent Basket

Forties' dominance within the Dated Brent basket—a benchmark critical to global oil pricing—has been cemented by the decline of Norway's Johan Sverdrup field. Once the linchpin of Brent, Johan Sverdrup's output is projected to fall by 10% annually, leaving Forties as the primary component. This scarcity has drawn aggressive bids from traders like Vitol and Gunvor, pushing Forties premiums to dated Brent +$1.10 in recent weeks.

Meanwhile, WTI Midland faces a perfect storm. Permian Basin production exceeds Gulf Coast pipeline capacity by 500,000 barrels/day, exacerbating Midland's backwardation—where spot prices outpace futures. The MEH-Midland spread (Houston vs. Midland) is expected to widen further, squeezing Midland's valuation. Even TotalEnergies, a stalwart buyer, has scaled back bid discounts from +2.20 to negligible offers, signaling market skepticism.

The Futures Play: Long Forties, Short Midland

The June-dated spread trade hinges on two dynamics:
1. Forties' Contango: Its futures curve remains steep, with higher prices locked in for later delivery.
2. Midland's Backwardation: Spot Midland prices are artificially inflated by constrained takeaway capacity, setting up a mean-reversion catalyst.

Actionable Strategy:
- Futures Traders: Go long June Forties futures and short June WTI Midland contracts. Focus on expiring June positions, as liquidity evaporates post-settlement.
- Physical Arbitrageurs: Secure Forties cargoes at bids like dated Brent +$0.95 FOB Hound Point and hedge with Midland swaps. Repsol's recent sale to TotalEnergies at dated Brent +$1.50 CIF Rotterdam highlights the narrowing bid-ask window.

The Clock is Ticking

June's contract expiry compresses liquidity, creating urgency. Traders like Mercuria are already scrambling to lock in Forties positions before bids tighten further. The risk of missing this window is stark: delayed action could see spreads narrow as OPEC+ policy shifts or pipeline expansions (e.g., the delayed Cactus II expansion) ease Midland's oversupply.

Risk Factors & Exit Strategy

• OPEC+ Cuts: A surprise production reduction could boost Midland prices, compressing the spread.
• Pipeline Relief: If Gulf Coast takeaway capacity expands faster than expected, Midland's backwardation could ease.

Exit Plan: Close positions by June 20, before the expiry-driven liquidity crunch. Monitor bid-ask spreads on June-dated contracts—narrowing differentials signal the window is closing.

Final Call to Action

This is not a long-term bet but a high-reward, short-term opportunity. The structural forces favoring Forties' premium and Midland's liquidity crisis are clear. Execute the long/short spread trade swiftly, and prepare to exit before the June expiry crushes liquidity. Time is the enemy here—act now, or miss the chance entirely.

The North Sea's premium party won't last. Grab your slice while it's still on the table.