July 6, 2026

Arbitrage signals as leading indicators of flow allocation

See routing bias before flows confirm it

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Kpler's backtest links crude arbitrage signals with subsequent physical flow allocation across
USGC, LatAm and WAF crude systems. The strongest relationships emerge when arbitrage
signals are compared with flows 15–45 days later, consistent with physical trading timelines.

Figure 1 : West-to-East WTI Midland Arbitrage Spread versus USGC Flows

Arbitrage signals show a measurable lead relationship

Physical flows do not respond instantly. Across the tested systems, changes in destination economics are often reflected in subsequent flow allocation.

The relationship is strongest where barrels have optionality

Region	Signal	Correlation
LatAm sweet crude	Strongest tested signal	0.76
USGC Midland	Most commercially significant	0.43
WAF Light Sweet	Directionally consistent	0.35

Not all arbs matter

For USGC Midland, flow response becomes more pronounced once the West-East spread exceeds roughly +2 $/bbl.

From signals to action

Arbs are not cargo-level predictions. Freight, vessel availability, term commitments, refinery demand and quality constraints can all prevent a screen-open arb from being executed. Their value lies in identifying potential routing bias before it becomes visible in physical flow data.

Monitor whether fixtures and nominations confirm a stronger Westbound pull.
Track whether improving Eastbound economics are reflected in physical allocation.
Distinguish between transient pricing signals and moves that ultimately influence where barrels clear.

Read the full white paper for methodology, robustness testing and limitations.

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