The chart below shows the performance of Brent (Global benchmark price) and WTI (US benchmark price) crude oil over the last six months. For the last couple of years, the major trend between the two benchmark prices has been that Brent crude oil was rising at a faster pace than WTI. While the two benchmark prices historically traded pretty much in-line with each other, the spread widened to record (second chart) levels in the last couple of years as increased production in the US and geo-political tensions in the Middle-East were just two of the factors that contributed to the price disparity.
Over the last few weeks, though, Brent and WTI crude oil have switched roles. While WTI crude oil has been showing signs of strength, Brent crude oil has been trending lower. One reason behind the change in roles is due to strong economic data in the US and weakness in Europe. As a result of the changed roles between Brent and WTI, the spread has nearly been cut in half over the last two months, and it is now at its lowest level since July and within two dollars of a 52-week low.
See also:So why should anybody who doesn't trade commodities for a living care about the price of crude oil in Europe and the spread between it and oil prices in the US? The reason is that for anybody who drives a car, these prices matter a lot....MORE
January 2013
Expanded Seaway pipeline start-up proceeds, crude flows--Next Steps: Double Capacity Again, Watch WTI-Brent Spread Shrink, Saudis Cry (ENB; EPD)
January 2013
Trading the Brent/WTI Spread
January 2013
Schork: "Demise of Brent/WTI premium might be premature" (EPD; ENB)
February 2013
Schork Was Right (and a little lucky)--"Brent-WTI Surges To 2-Month Highs"
February 2013
The Brent-WTI Spread and the Price of Gasoline
March 2013
"Are They Never Ever Getting Back Together Again? Latest WTI/Brent Relationship Update"
So what's that got to do with the price of gasoline in Amsterdam?
