A Flip in Oil Markets
A Flip In Oil Markets, Econospeak, Barkley Rosser
A long time ago, sometime before the 2008 crash, prices of Brent crude oil and West Texas Intermediate (WTI) crude ran close to each other. WTI would from time to time would exceed Brent, with them kind of bouncing around as they moved along. This changed with the financial market crash of 2008, with Brent becoming chronically higher than WTI, nearly always by several dollars per barrel. For various reasons arbitrage did not operate fully to bring those prices back together again.
But today for the first time in well over a decade it happened. The Brent price declined while WTI did not, with WTI at $86.90 per barrel with Brent at $86.79. I am not sure what has brought this about or how long it will last, but this is something we have not seen this for a long time.
Barkley Rosser
i didn’t see that, nor could i find it in checking oil price records…but i have no doubt that you saw that somewhere, since there are so many different prices for Brent and WTI floating around at any given time…the media usually quotes the front month, or prompt month futures contract as “the price of oil”, and since WTI and Brent expirations are nearly a month apart, we’re almost never viewing comparable prices…
it seems you were viewing the February WTI contract at its $86.90 expiration price late Thursday; the next minute of trading, they would be quoting the March WTI contract at $85.55 a barrel as the US price of oil, even there was no drop in price in either contract…(March WTI oil did fall later) all quotes for Brent at the same time should have referenced the March contract, which was higher…perhaps someone posted a spot price, or a contract price for some other month, i couldn’t guess…at any rate, a February WTI contract isn’t comparable to a March Brent contract, anymore than bonds with different maturity dates can be exchanged for each other…
here’s the record for February WTI prices:
https://www.barchart.com/futures/quotes/CLG22/price-history/historical
March WTI prices: https://www.barchart.com/futures/quotes/CLH22/price-history/historical
March Brent prices: https://www.barchart.com/futures/quotes/CBH22/price-history/historical (priced at $88.50)
for contrast, here’s the 2023 price for March Brent:
https://www.barchart.com/futures/quotes/CBH23/price-history/historical (@ $79.24 right now)
for the past couple weeks, oil prices a year out have been running about 10% lower than current prices….
here’s an interactive price graph for the expired February WTI contract: https://www.barchart.com/futures/quotes/CLG22/interactive-chart
by using the menu and scrolling the graph backwards, you can view prices minute by minute….it’s tedious, but i’ve done it when i’ve wanted to go back in time…
here’s a graph for March Brent: https://www.barchart.com/futures/quotes/CBH22/interactive-chart
& for April Brent, which they’ll be quoting as the price of Brent in a few days:
https://www.barchart.com/futures/quotes/CBJ22/interactive-chart
you should be able to see the way those urls are constructed to get to any graph or price list you want to look at, and since you know what time you saw those prices, maybe find out what you were looking at…
I wonder how much if the North Sea depletion has anything to do with the decline. For WTI, most of what we suck out of the ground is sour that has to be blended in Cushman, OK with light sweet coming from Canada, the Dakota’s and Colorado before sent to the refiners in Houston and Louisiana. The Keystone was going to help with the blend process which was why so many down here were pissed about the immediate cancellation. Nobody wants to buy sour oil and the more we frac, the more sour we get.
Micheal, i’m sorry, you have that story backwards….most of what we’re getting from shale is light sweet crude, whereas what comes out of Canada (and Venezuela) is heavy and sour, with tar sands oil having the consistency of a hockey puck during the winter…Bakken crude, which is as light and flammable as gasoline, is piped to Canada to mix with their crude so the dilbit (diluted bitumen) can be shipped by pipeline….
the Koch brother’s Gulf Coast refineries were built to process heavy sour crude from Venezuela, and when Chavez took over, they pushed for a pipeline from Canada for an equivalent crude…for a while, US Gulf Coast refineries were importing Russian Urals crude to replace the Venezuelan crude…it wasn’t until plans were in place to reverse the Capline from Patoka Illinois to the Gulf Coast that the Keystone XL became unimportant to the oil industry….Enbridge Line 3 and other Canadian pipelines run to Patoka, and the Capline has 50% more capacity than Keystone XL would have had, so Canada is now exporting more oil than they ever did….the anti Keystone environmentalists got snookered…
here’s Platt’s interactive periodic table of oil, showing details on 150 grades of crude:
https://www.spglobal.com/platts/plattscontent/_assets/_files/downloads/crude_grades_periodic_table/crude_grades_periodic_table.html
the heavy sours are on the right, the light sweets are on the left
generally, refineries are built to process a certain grade, or range of grades, and have to come up with a comparable alternative when that grade becomes unavailable…
I’ve been lied to by the oil industry haha. Thanks for the info.
reading you again, Michael, & you do have that half right, in that oil from the Niobrara chalk in Colorado and Bakken crude from North Dakota are light sweet crudes, but that’s not true on what we get from Canada….basically, we have a glut of the higher quality light crude, so much so that it’s a lot of what we’re exporting…on the other hand, many of the Gulf refineries need a heavier crude, and that’s what we’re importing…