Direct Facts - Econbrowser's Brent-WTI Spread

12:39 PM Posted by Baris Sanli
There is plenty of discussion about the spread between WTI-Brent. There are numerous articles on this. What I want to show you is the spread between WTI and others. Econbrowser has a nice graph of this. Textbook says "if there is price differences between two or more markets, arbitrage opportunities exits". (Check this)

Now there are reasons for this price differentials. Paper oil ( "buy WTI futures and sell Brent futures" ) is one of them, but speculators are not as active as in 2007. But website suggests a few solutions:
  • Running the Seaway pipeline, which is currently delivering oil from the (Freeport, Texas) Gulf of Mexico to Oklahoma, in reverse. ConocoPhilips is not interested in this idea because of a fear for political criticsm and most importantly on economical grounds ("As an integrated refiner and producer, it can take its profits either as refinery margin or producer-seller.") . “A reversal would send up to 350,000 barrels a day of crude from Cushing directly to Houston, significantly releasing pressure on the Cushing complex,” said JBC Energy GmbH, a Vienna-based researcher. "
  • "It ... costs $6 to ship a barrel from Cushing to the Gulf of Mexico by rail or $10 by truck"
Ref: Econbrowser
http://www.econbrowser.com/archives/2011/02/brentwti_spread.html
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