WTI and Brent used to trade in line, but prices diverged over the past few years
The spread between West Texas Intermediate (WTI) and Brent crude
represents the difference between two different crude benchmarks. WTI
more represents the price that U.S. oil producers receive, and Brent
more represents the prices received internationally. The two crudes are
of similar quality, and theoretically should be priced very close to
each other. However, the prices differed greatly between the two crudes
because a recent surge in production in the United States has caused a
buildup of crude oil inventories
at Cushing, Oklahoma, where WTI is priced. This created a supply and
demand imbalance at the hub, causing WTI to trade lower than Brent.
Before this increase in U.S. oil production, the two crudes had historically traded in-line with each other. (more)
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