The world’s biggest oil traders are counting hefty losses after a surprise doubling in the price discount of U.S. light crude to benchmark Brent in just a month, as surging U.S production upends the market. Trading desks of oil major BP and merchants Vitol, Gunvor and Trafigura have recorded losses in the tens of millions of dollars each as a result of the “whipsaw” move when the spread reached more than $11.50 a barrel in June, insiders familiar with their performance told Reuters.

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The sources did not give precise figures for the losses, but they said they were enough for Gunvor and BP to fire at least one trader each. The companies declined to comment, and none of them publish details of their individual trading books. It highlights the challenges of trading in WTI futures, the benchmark for U.S. crude, when U.S. pipeline and storage infrastructure struggles to keep pace with surging shale output, that has lifted the United States above Saudi Arabia to become the world’s second biggest crude producer behind Russia. “As the exporter of U.S. crude, traders are naturally long WTI and hedge their bets by shorting Brent. When the spreads widen so wildly, you lose money,” said a top executive with one of the four trading firms. The discount of WTI to Brent hit $11.57 a barrel on June 6, the widest in more than three years, as U.S. output surged to record highs and surpassed pipeline capacity as traders rushed to export. The discount had been about $5 just a month before. Betting on the price spread, a popular trade in oil markets, is based on predictions of price differences between European and U.S. market fundamentals.

"Widowmaker"