A rare event in the oil market.. How is American crude trading at a higher price than Brent?
In global oil markets, US West Texas Intermediate crude typically trades below Brent Crude, with a difference of between $2 and $5 per barrel in favor of Brent, but this long-standing relationship has been turned upside down in recent weeks, marking a rare turn that the markets have not seen since 2009
How did US oil outperform?
In early April, before the announcement of a ceasefire in Iran, the price of West Texas Intermediate crude rose to become higher than Brent, with US crude trading more than $3 above the global standard. This trend continued, with the price of WTI crude oil ranging between $114 and $115 per barrel, while Brent was trading between $109 and $111.
Why did this reversal occur?
This reversal is mainly due to West Texas Intermediate is relatively immune to these disruptions, supported by strong domestic demand and a pipeline distribution network, ensuring its availability despite bottlenecks in global supply chains.
The Short-Term Contracts Factor
Another important aspect, a Wall Street Journal report points out, is short-term contracts. The report explained that US crude contracts (linked to immediate delivery) are trading at a higher price due to scarcity of supply, while the Brent crude contract for late delivery was extended, which led to a decline in its price in the near term.
- For more: Follow Khaleejion 24 Arabic, Khaleejion 24 English, Khaleejion 24 Live, and for social media follow us on Facebook and Twitter
