Price Difference Between Brent And WTI Crude Oil Narrowing
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Posted on 07/01/2013 6:Forty five:27 AM PDT by thackney
The Brent-WTI spread, the difference between the prices of Brent and West Texas Intermediate (WTI) crude oils, has narrowed significantly over the previous several months. The unfold, which was more than $23 per barrel ($/bbl) in mid-February, fell to under $9/bbl in April, and has ranged between $6/bbl and $10/bbl since then. The narrowing of the unfold is supported by a number of factors which have: – Lowered Brent (North Sea) costs as a result of Brent-quality crude imports into North America have been displaced by increased U.S. mild sweet crude manufacturing, decreasing Brent-high quality crude demand – Raised WTI (Cushing, Oklahoma) costs as a result of the infrastructure limitations that had lowered WTI prices are lessening Earlier than 2011, Brent and WTI crude oil costs tracked intently, with Brent crude oil prices typically buying and selling at a slight discount to WTI crude oil, reflecting supply costs to transport Brent crude oil and Brent-like crude oil into the U.S. market, the place they competed with WTI crude oil. In early 2011, this longstanding relationship started to vary, and since then, WTI crude oil has priced at a persistent discount to Brent crude oil. Increased U.S. mild sweet crude oil manufacturing mixed with refinery in petroleum industry limited pipeline capacity to maneuver the crude from manufacturing fields and storage places, together with Cushing, Oklahoma, the supply point for the Nymex gentle sweet crude oil contract, to refining centers put downward pressure on the worth of WTI crude oil. Extra lately, expansions in U.S. crude oil infrastructure have eased the downward pressure on the worth of WTI. Since mid-2012, significant pipeline takeaway capacity has been added at Cushing, enabling crude oil to stream to and from the trading hub extra easily. Other pipeline and rail projects have additionally been accomplished, making it doable to move barrels from production areas, akin to Texas and North Dakota, to refinery centers with out passing through the hub. Even U.S. East Coast refineries, which historically have relied on Brent crude oil and Brent-like crudes, can now entry U.S. gentle candy crude oil. U.S. crude that moves by rail is replacing Brent crude oil and Brent-like crude oil imports into the U.S. East Coast, placing downward strain on the worth of Brent crude oil and narrowing the differential versus WTI crude oil. The future of the Brent-WTI price unfold will probably be decided, partially, by the steadiness between future progress in U.S. crude manufacturing and the capability of crude oil infrastructure to move that crude to U.S. refiners. The International Vitality Company (IEA) reported that deliberate upkeep within the North Sea oil fields this summer time will cut back manufacturing, including upward pressure to Brent costs and probably widening the Brent-WTI spread. In its June 2013 Quick-Term Vitality refinery in petroleum industry Outlook, EIA forecast the Brent-WTI worth unfold to average $eleven/bbl in 2013 and decline to an average $eight/bbl in 2014. For extra info about the Brent-WTI spread, see the June 5, 2013, edition of This Week in Petroleum.
Key components behind the latest narrowing within the Brent-WTI Spread
1 posted on 07/01/2013 6:45:27 AM refinery in petroleum industry PDT by thackney
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