London (CNN Business)West Texas Intermediate crude, the reference point for US oil prices, usually trades at a discount of a few dollars to Brent crude, the global benchmark.
But this morning, the near-term futures contracts for WTI and Brent are both roughly $115 per barrel — an indication of how the market has been scrambled by the pandemic and the war in Ukraine ahead of the busy summer driving season.
"This is a significant development in my opinion," Jeffrey Halley, a senior market analyst at Oanda, told clients on Tuesday.
Quick rewind: Oil prices have jumped over the past week. Both WTI and Brent are trading near two-month highs. The national average for regular gas in the United States hit a fresh record of $4.52 a gallon on Tuesday, according to AAA.
The main contributor to the run-up in prices is Europe's consideration of a formal embargo on oil from Russia to punish Russian President Vladimir Putin, which is pushing countries in the bloc to race to secure supplies from other markets.
Energy prices are also rising as China indicates it intends to ease some restrictions on movement in the coming weeks, which could drive up demand for fuel after a lull.
On Monday, Shanghai officials announced a three-stage plan to "return to normalcy" by mid-June, and said Tuesday that the community spread of Covid-19 outside quarantined areas had been eliminated, an important turning point.
Aviation within China has increased from 25% at the start of this month to 40%, Janiv Shah, an analyst at Rystad Energy, told me.
This all comes ahead of summer in the United States and Europe, when demand for fuel leaps as people jump in their cars and head out on road trips and other vacations.
A new wrinkle: That oil prices are climbing in a tight market where supply can't keep up isn't surprising. But it is unusual for WTI and Brent crude to trade so close to each other.
Shah said the problem boils down to Europe's pivot away from Russia's Urals crude, which has triggered a mad dash to find replacement barrels in other parts of the market.
"We're seeing the lack of these Russian crudes in the European refining system," Shah said. "What that has done is increase the value of all remaining grades."
At the same time, US refiners are trying to ramp up activity to meet demand, which is also squeezing WTI higher.
The takeaway: Oil traders in the West have fewer options than they used to, as they worry about running afoul of sanctions on Moscow and dealing with difficult logistics in the Black Sea. That means they're buying whatever they can get their hands on — which in turn distorts the market.
One caveat: If you look at WTI and Brent for delivery in July, US oil is still trading at a discount of more than $2 a barrel, though the margin has narrowed significantly since May.
Abnormal dynamics could persist in oil trading for some time. Saudi Arabia's energy minister said Monday that even if countries that could theoretically increase production, refiners couldn't keep up.
"There is no refining capacity commensurate with the current demand and the expectation of the demand in the summer," Prince Abdulaziz bin Salman said at an energy conference.