New York: US oil futures traded above the global crude-market benchmark, North Sea Brent, for the first time since 2010 on Friday as signs of strong demand from US refiners boosted spread trading and bets that the era of the US discount was ending.

While prices on both sides of the Atlantic fell for most of Friday’s session as traders booked end-of-week profits, US.

benchmark West Texas Intermediate (WTI) crude climbed in the final minutes of trade to close near a 16-month high above $108 (Dh396), while Brent settled lower.

Trade data released late on Friday by the US Commodity Futures Trading Commission (CFTC) showed hedge funds had assisted the move, amassing record bets on rising US crude oil prices in the week to July 16.

In early afternoon trade, US crude for September delivery reached a 5-cent premium over Brent in heavy trading volume, finally erasing a discount that has persisted for 33 months.

“It was kind of a historic moment, really. It’s come a long way so fast,” said Phil Flynn, energy analyst at the Price Futures Group in Chicago.

“I think the trend is going to continue because the quality of US crude is high, and it’s coming from a country that’s a major user of oil with an economy that’s doing better than the alternatives right now.” The last time WTI traded above Brent was October 2010, but historically it was often the higher priced oil and served as the world’s benchmark.

Pipeline capacity

As recently as February of this year, Brent traded at a $23 premium to US crude as stockpiles mounted at the contract’s delivery point of Cushing, Oklahoma. But increased pipeline capacity has seen stocks now start to fall.

Brent for September fell 63 cents to settle at $108.07 a barrel after hitting $109.18 earlier in the session.

August US crude hit a 16-month high of $109.32 earlier in the day and settled at $108.05, up 1 cent. It extended its gains in post-settlement trading, up 28 cents to $108.32 at 3.37pm EDT (1937 GMT).

US oil for September delivery ended up 6 cents at $107.87 a barrel.

Friday’s trade followed a month-long rally in which both benchmarks topped $109 a barrel. Brent crude has gained 7.5 percent in the last four weeks, while US crude has shot up by more than 15 percent.

Hedge funds have been betting heavily on the rally continuing, the CFTC data showed on Friday, and now hold futures and options contracts equivalent to more than 350 million barrels of crude oil, or almost four days’ worth of global demand.

“I wouldn’t say it’s a bubble, but we’re certainly, intuitively, in that area where you would think it’s a very crowded trade to the upside,” said Stephen Schork, editor of The Schork Report in Villanova, Pennsylvania.

Refiners drive demand

The convergence of the two front-month crude benchmarks comes as increased pipeline capacity has drained the glut of oil at the WTI delivery point of Cushing, Oklahoma, to the US Gulf Coast, where refinery demand has been high. Stocks at Cushing have fallen to 46 million barrels from 52 million in January.

Refiners, enjoying bumper profit margins on export sales, are running their hardest since 2005, drawing down US crude inventories at the fastest rate on record.

On the Gulf Coast, refinery runs averaged nearly 8.5 million bpd, the highest level on US government records dating back to 1992, and up nearly 400,000 bpd from June 14.

Some traders expressed scepticism that the US contract would extend its gains.

The measure of the relative strength of US crude oil futures has shown them technically “overbought” for the longest stretch in four years, according to one indicator.

The relative strength index, or RSI, has been above 70 since July 5, a sign that a commodity has been overbought and ready for a fall. On Friday, it ended above 75.

“Now that US crude is almost on par with Brent, we have to search for a strong enough factor that’s going to push both markets higher,” said Gene McGillian, an analyst at Tradition Energy in Stamford, Connecticut.

“Here in the US, the economy continues to improve, but it’s not all roses yet. The market has over-extended and it’s vulnerable to profit-taking.”