HOUSTON, June 6 (Reuters) - The spread between U.S. West

Texas Intermediate and Brent crude futures narrowed to its

tightest level since September 2023 on Friday as U.S. prices

rose on a sliding rig count and Canadian wildfires that cut

supplies, analysts and traders said.

U.S. futures ended the week 4.9% higher, while Brent futures

rose 2.75%, as OPEC+ output increases put a cap on gains.

WHY IT'S IMPORTANT

A narrower spread indicates a closed arbitrage window for

traders and weaker shipping economics to Europe and Asia. The

tighter spread can act as an early indicator that U.S. crude

exports will likely fall in the next few weeks, assuming the

premium for Brent crude remains weak.

The inclusion of WTI-Midland crude in the dated Brent index

has meant that the spread between the two is increasingly

correlated to freight rates, as the price of Dated Brent is set

by WTI Midland on many trading days.

BY THE NUMBERS

The spread between the two crude benchmarks narrowed to as

little as $2.78 a barrel during the session on Friday. A

discount of $4 per barrel is typically considered the level that

encourages U.S. exports to Europe, as traders see an open

arbitrage route.

The spread has remained narrower than $4 a barrel since May

1, according to data from LSEG, partly due to concerns around

U.S. production, helping keep more barrels onshore, according to

Phil Flynn, senior analyst with Price Futures Group.

CONTEXT

Since April, OPEC+ countries including Saudi Arabia and Russia

have made or announced increases totaling 1.37 million barrels

per day, or 62% of the 2.2 million bpd they aim to add back to

the market.

Meanwhile the U.S. oil and gas rig count, an early indicator of

future output, fell by four to 559 in the week to June 6, the

lowest since November 2021, energy services firm Baker Hughes ( BKR )

said in its closely followed report on Friday, stoking

some concerns around future U.S. production. This has helped

create pricing that encourages U.S. oil to remain in the

domestic market, traders and analysts said.

Wildfires burning in Canada's oil-producing province of

Alberta have further buoyed U.S. crude futures, analysts said,

with Canadian daily crude production down by about 7%.

"With Canadian wildfire season underway, further disruption

could push the WTI/Brent spread below $3 this summer," said

analysts at Sparta Commodities.

KEY QUOTES

"When you look at the WTI/Brent spread, you can see the

concerns a little bit around leveling off U.S. production and

concerns about export barrels tightening up," said Price Futures

Group's Flynn.