earlywarn.blogspot.com: Brent & WTI

September 12, 2011


October 14, 2011

Above, I show the price of Saudi Arabian Light grade from the beginning of 2000 (on the y-axis) versus either Brent or WTI on the x-axis. Historically, Arab Light has always sold at a slight and only moderately variable discount to Brent/WTI (because Arab Light is more sour). The black line above represents exactly equal prices. However, in recent months, the historical relationship with WTI has completely broken down and Arab Light is selling for much more than WTI. The relationship to Brent is unchanged.

average weekly retail price of US gasoline versus WTI (top panel) and Brent (lower panel):

you can see that the correlation with Brent is a bit tighter and in particular the current anomaly in the WTI graph where gas prices are too high relative to WTI (the «loose end of the string» at about ($80, $3.50)) is non-existent in the Brent graph where current prices are pretty much normal. WTI is now reflecting an anomalous situation in the US midwest and no longer even explains US gas prices well, let alone global trends.

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