Why wti is at a premium from brent

Your Practice. Popular Courses. Commodities Oil. Oil Guide to Investing in Oil Markets. Table of Contents Expand. Brent Crude. West Texas Intermediate. Key Differences. Brent Crude vs. Key Takeaways Brent Crude and West Texas Intermediate dominate the oil market, and both dictate pricing in their respective markets.

OPEC, a group of 13 of the most powerful oil exporting countries, use Brent as their pricing benchmark. They are considered an extremely powerful group, as oil prices dictate the budgets and policies of many countries.

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Brent Crude is extracted from the North Sea. This accounts for around two-thirds of internationally traded crude oil. Source: WisdomTree, Bloomberg as at 29 April.

Spread calculated as the difference between the prices of the generic first futures contracts of Brent and WTI. For this reason, WTI ought to theoretically trade at a premium over Brent. For a large part of the first decade of this century, WTI did indeed trade at a premium, i. Over the last decade however, the shale revolution in the US has brought large volumes of oil into the market making the US one of the largest oil producers in the world. The shale revolution refers to a combination of technological improvements and financial infrastructure enabling the US to produce oil from low-permeable shale, sandstone and carbonate rock formations in larger quantities than ever before.

In line with economic principles of demand and supply, as the total volume of oil production increased in the US, this put downward pressure on WTI. The Brent-WTI spread has generally been positive in the last decade. Another reason for the Brent-WTI spread is the logistical challenge for the US to transport oil from landlocked production hubs through a network of pipelines and to ship it overseas.

In contrast, Brent is produced at or closer to sea making it easier for it to reach its overseas destinations. The US is however investing heavily in its pipeline infrastructure to enable it to send large vessels of oil from its shores to international buyers.

Several such infrastructure projects are expected to be completed by when we might see an increase in demand for WTI and thus a narrowing of its spread with Brent. The crash occurred a day before the active Nymex WTI futures contract was due to expire.

This contract, meant to deliver oil between 01 May and 31 May, crashed into negative territory as oil storage in the US became very tight. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. Sign up now to get the information you need!

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Oil - US Crude. Wall Street. More View more. WTI vs Brent: What are the differences? Source: eia. Energy Information Administration 3. Brent production, on the other hand, has ticked up. North Sea producers are on track to lift production by a stronger-than-forecast , barrels day in see chart , the International Energy Agency said in a December report. Declining field production and a return to normal maintenance should curb volumes by , barrels a day in , bringing production back down to 2.

Analysts said bearish traders have been more aggressive in betting that the U. While bears may still hold sway, their attention might now be more focused on Brent. The Citadel Securities founder knows funny, and saying that his firm plotted to stop the GameStop short squeeze is not it. Based in New York, Watts writes about stocks, bonds, currencies and commodities, including oil.