An unusual disconnect has emerged in the US oil market, with headline futures slumping to levels below $90 a barrel even as traders in the physical crude market report surprisingly robust demand and strong pricing.

In New York and London, big funds and speculators have turned very bearish on prices due to signs of weakening demand in China and Europe, steady exports from Iraq and Libya and a rallying dollar.

US futures have fallen 17 per cent since mid-June and hit $88.18 per barrel, the lowest since April 2013.

Among cash traders in Houston and Calgary, where batches of North American crude are bought and sold for delivery in a month’s time based on a premium or discount versus futures, a long-anticipated collapse has failed to materialise.

Instead, differentials from Canada to the Gulf Coast are holding steady or even rising as refiners run at their fastest rate for this time of year in over a decade, buoyed by strong profit margins thanks to cheap production from shale hydro fracturing and record fuel exports.

The split views illustrate a surprising twist in the US “fracking” revolution.

This turn is due largely to US refiners expanding their capacity far more than expected. That has allowed them to absorb a larger share of oil from North Dakota’s Bakken or the Eagle Ford shale plays in Texas, which is illegal to export and would otherwise swell inventories.