To be fair, the price of WTI should be higher than that of Brent, considering its sweeter and lighter quality. After all, WTI has an API gravity of 39.6 degrees and a sulfur content of 0.24%, while Brent has an API gravity of around 38 degrees and a sulfur content of somewhere around 0.40%. The lower the density, the easier it is for it to be refined into gasoline or diesel fuel. Conversely, the higher the density, or "heavier," the oil is, the harder it is to refine.
However, since 2013, Brent has been the more expensive crude blend thanks to its status as the global oil benchmark and a better indicator of global oil prices. That is the case because Brent essentially draws its oil from more than a dozen oil fields located in the North Sea, while WTI is sourced from U.S. oil fields, including the pivotal Cushing Oil Field.
According to ICE Futures, ~60% of the world's traded oil is priced off of Brent. But the crude hierarchy was upset for a brief moment a few days ago after WTI stole Brent's crown as the more expensive oil.
On Tuesday, WTI price crossed Brent to trade at $115.4/bbl vs. 115.2/bbl, an anomaly that the experts are saying is an indication of how the market has been scrambled by the pandemic and the war in Ukraine ahead of the busy summer driving season.
The WTI-Brent spread is tracked here.
See comments:
Now I remember what this is about, there was excitement about it happening a couple months ago, too...
... Brent oil contracts roll off the board almost a full month before WTI contracts, which means price quotes on news sites are quoting prices for different months for the two benchmarks...
... in this week's case, they'd have been seeing Brent prices for July and WTI prices for June...but the backwardation is insane; next month's prices have been running ~$3 lower for both....
... if they'd compare similar contracts, i.e., July to July, they'd find the Brent price is still higher...
Later:
WTI for June delivery rose $1.02 to settle at $113.23 a barrel in New York.
WTI for July, which has greater volume and open interest, rose 39 cents to settle at $110.28.
Brent for July rose 51 cents to settle at $112.55 a barrel.
now i remember what this is about, there was excitement about it happening a couple months ago, too...Brent oil contracts roll off the board almost a full month before WTI contracts, which means price quotes on news sites are quoting prices for different months for the two benchmarks...in this week's case, they'd have been seeing Brent prices for July and WTI prices for June...but the backwardation is insane; next month's prices have been running ~$3 lower for both....if they'd compare similar contracts, ie, July to July, they'd find the Brent price is still higher...
ReplyDeleteAbsolutely amazing what you pick up. Thank you. We'll see how this plays out.
Deletethis week's closing prices from Rigzone
DeleteWTI for June delivery rose $1.02 to settle at $113.23 a barrel in New York.
WTI for July, which has greater volume and open interest, rose 39 cents to settle at $110.28.
Brent for July rose 51 cents to settle at $112.55 a barrel.
Thank you. Bruce.
Delete