Brent and WTI Spread Widens to Highest Level

The difference in the per barrel crude oil prices of Brent, the benchmark used worldwide, and West Texas Intermediate (WTI), the benchmark mainly used in the U.S., just reached $25.

That is the biggest difference between the two crude contracts in more than a year. Moreover, that difference is not so far from all-time record highs.

The drop in the current crude price of West Texas Intermediate (WTI) may appear contradicting to the reports about violence coming from the Israel-Palestinian region.

Strategist Dave Lutz of Stifel Nicolaus said in a short note that he believes the widening Brent-WTI spread between the per barrel crude oil prices of the European and U.S. benchmarks reflects a total rotation into Brent. Moreover, the present expiry of the WTI spot contract is putting downward pressure on the current crude price on the NYMEX.

So why is the current crude price of Brent $25 a barrel more than that of WTI? The broadening spread in the past years is specifically attributed to the changing supply scenario in the U.S. that has pushed the per barrel crude oil prices of WTI lower.

Consequently, the significance of the price of Brent crude has gained attention globally as it is a better reflection of the condition of the world oil markets.

Currently, the difference between the two crude contracts has an additional driver, which is the Middle Eastern tensions, particularly the growing conflict between the Gaza region and Israel.

People should not be fooled by the hit on WTI since the threat from the growing conflict is building quickly.

By: Chris Termeer

Chris Termeer

Chris Termeer is an oil and gas consultant, industry commentator and analyst. His book, Fundamentals of Investing in Oil and Gas provides a comprehensive overview of all aspects of the oil and gas industry, including exploration, drilling, production, storage, transportation and refining, to name but a few.

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