WTI’s structural shift
16 February 2012
Don’t write off the US, its oil benchmark, or its currency just yet. The country’s role in the global oil market, said since 2007 to be losing its significance, will be decisive again, says Derek Brower
FOR NOW, in the battle of the crude-oil benchmarks, Brent is winning. Traders are flocking from Nymex, home of WTI, to Intercontinental Exchange (Ice), the platform for the surging Brent contract. Brent, against which about two-thirds of the world’s oil is priced, reflects what’s happening in global oil markets, runs the argument. WTI’s role as a barometer is over.
That’s certainly true for now. Last year’s war in Libya, which took 1.6 million barrels a day (b/d) out of the quality end of the crude market, pushed up Brent, giving it a solid premium over WTI. And approaching sanctions on Iran; the loss of South Sudanese crude amid a spat with Sudan; and even a cold snap in Europe – all factors directly affecting the balance of supply for the world beyond US borders – have injected more strength into the contract.
The backwardation in...