Home > Chemical News

Chemical News

Americas:What's behind price spread between Brent and WTI crude oil futures?

https://www.chemnet.com   Feb 16,2011 commodityonline
Many traders of Crude Oil futures have been shaking their heads in disbelief, as the price spread between Brent Crude Oil and WTI Crude Oil futures has moved to a shocking $16.00 Brent premium over the WTI contract in the lead month contracts.

First, a bit of background on the two types of Crude. WTI Crude Oil is viewed as the "benchmark" for the North American Crude Oil market. Brent Crude Oil, or North Sea Brent Crude, is known as the European "benchmark' grade. Normally, WTI Crude should trade at a slight premium to Brent due to its lower sulfur content, which makes this grade more desirable for the refining of gasoline.
However, the delivery point for the NYMEX WTI futures in Cushing, Oklahoma is nearing capacity, as oil continues to flow into storage there. This has been the major reason cited by many traders and analysts for the "disconnect" between these similar "benchmark" Oil futures products.

The political situation in Egypt has helped Brent Crude Oil trade at over $100 per barrel, as traders fear any possible disruptions of Oil moving through the Suez-Mediterranean or "Sumed" Pipeline, which transports Oil through Egypt en route to ports on the Mediterranean Sea, as well as Oil shipments through the Suez Canal.

Though there have been no reported disruptions so far, some traders fear that we may see further political upheaval in other nations in the Middle East and North Africa, where huge amounts of Oil are exported. Given the "supply" issues currently seen in Cushing, Oil traders also may want to watch the Brent Crude Oil futures market along with the WTI futures to get a "clearer"picture of current traders' views on the direction of Crude Oil prices.

 Print  |    add to Favorites  |    Close