Forties vs. WTI: A Time-Sensitive Arbitrage Play Before June's Expiry

The widening gap between North Sea Forties crude and U.S. WTI Midland futures in June 2025 has crystallized into a compelling arbitrage opportunity, driven by structural imbalances and the impending expiry of June-dated contracts. As of June 6, Forties traded at dated Brent +$0.81 FOB Hound Point, while WTI Midland remained at dated Brent +$0.84 FOB, narrowing slightly from recent highs but still offering a fleeting edge. With June contracts set to expire by June 20, traders face a critical window to capitalize on this spread—a window that will close abruptly as liquidity vanishes. Let's dissect why this opportunity exists and how to act before it slips away.

The Structural Drivers of the Forties Premium

Forties' ascendancy as the dominant component of the Dated Brent basket has solidified its premium stability. With North Sea production projected to fall by 10% in 2025, Forties' scarcity is amplified. Traders like Vitol and Gunvor are aggressively bidding for cargoes at dated Brent +$1.10 FOB, leveraging Forties' contango structure—where future contracts trade higher than near-term ones—to lock in storage-linked gains. Meanwhile, Johan Sverdrup's declining premium (now dated Brent -60 cents) has further entrenched Forties' position as the go-to benchmark crude.

WTI Midland's Liquidity Headwinds

In contrast, WTI Midland faces a perfect storm of logistical bottlenecks and market skepticism. Permian Basin production exceeds Gulf Coast pipeline capacity by 500,000 barrels/day, creating a supply overhang. The MEH-Midland spread (Houston vs. Midland) is widening, as TotalEnergies and others reduce bids due to concerns about Midland's sustainability. Geopolitical risks—such as OPEC+ policy shifts or EU trade tariffs—add further pressure. Compounding this, WTI Midland futures trade in backwardation (near-term contracts priced lower than future ones), creating a contango-backwardation mismatch with Forties that amplifies arbitrage potential.

The Time-Sensitive Arbitrage Play

The optimal strategy is clear: go long Forties futures and short WTI Midland swaps, closing the position by June 20 before expiring contracts compress liquidity. Here's why urgency is paramount:
1. Liquidity Risk: As expiration nears, bid-ask spreads will widen sharply, locking out latecomers.
2. Structural Tailwinds: Forties' dominance and WTI's logistical strains are long-term trends, but the June expiry creates a time-bound catalyst.
3. Profit Mechanics: A $0.80 spread on 1,000 contracts yields $80,000 in profit, with gains compounding as Forties' contango and Midland's backwardation intensify.

A recent Vitol deal—selling WTI Midland to Moeve at dated Brent +$1.90 CIF Rotterdam—highlights traders already positioning. For physical arbitrageurs, securing Forties cargoes at $0.95 FOB and hedging with Midland swaps offers a low-risk entry point.

Risks and Considerations

• OPEC+ Interventions: A production cut could dampen crude prices broadly, though Forties' structural scarcity may limit downside.
• Pipeline Expansions: Delays in projects like Cactus II could prolong Permian bottlenecks, favoring Forties.
• Geopolitical Volatility: EU tariffs or U.S.-China trade dynamics could disrupt flows, but structural trends remain the dominant force.

Market Context: Tightening Crude Dynamics

Brent crude has risen to near $67/barrel, while WTI trades at $64.22, narrowing the WTI-Brent spread to $2.78/barrel—the tightest in two years. U.S. rig counts have fallen to 442, and Canadian wildfires (reducing output by 7%) support U.S. prices. OPEC+ has added 1.37 mbpd since April, but North American supply constraints keep the market balanced. These factors reinforce the case for Forties' premium durability.

Conclusion: Act Before the Clock Runs Out

The Forties-WTI Midland spread presents a high-conviction, time-bound opportunity. With June contracts expiring in 14 days, traders must act swiftly to secure gains before liquidity evaporates. The recommended strategy—long Forties/short Midland—is both analytically sound and structurally supported. Delaying beyond June 15 risks missing the window entirely. This is not merely a trade; it's a bet on enduring structural imbalances in a market recalibrating to new realities.

Final recommendation: Execute the spread by June 15, aiming to close positions by June 20. Let the contango work for you—and the backwardation against Midland—while time remains.