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Global Oil Price Yardsticks Tell Different Stories


After dropping to close to a six-year low in January, the price of oil has rallied in recent weeks. But how strong is the recovery? Depends on who you ask.

Looking at Brent, the global oil benchmark, the price is up more than 30%. But take West Texas Intermediate, the U.S. marker, and the percentage gain is less than half that.

That divergence has widened the gap between the market’s two main yardsticks. Brent is now traded at a premium of more than $10 to WTI for the first time in more than a year. The two benchmarks traded at near parity as recently as in January.

At the crux of the matter is the city of Cushing, Oklahoma, home of some 8,000 people. It is also home of the delivery point for the WTI barrels and a major storage point.

But storage has been filling up quickly in recent months. The U.S. Energy Information Administration reported on Wednesday that 48.7 million barrels of oil were in storage at Cushing, which has an estimated capacity of around 70 million barrels. In the U.S. as a whole, oil stockpiles are at the highest level for this time of year in the last 80 years, the EIA said.

That surplus has held back WTI price gains.

“Right now WTI is being pressured by the huge jump in storage at the Cushing hub,” said Hamza Khan, senior commodity strategist at ING Bank. Mr. Khan said that other bearish factors weighing on WTI include the recent refinery strikes coupled with the annual refinery maintenance season underway in the U.S. which are dampening the demand for crude.

Across the Atlantic, however, robust European refinery demand and Libya’s supply disruption because of the continuing turmoil have led Brent prices to rise faster, said Norbert Ruecker, head of commodities research at Julius Baer.

To be sure, the global crude fundamentals are still weak and it will take months before the oversupplied market is balanced. Both WTI and Brent prices could relapse. But for now, it’s Brent that’s making waves.

“The issue behind the spread is that WTI is weak, not that Brent is particularly strong,” said Tamas Varga, analyst at PVM.

Looking ahead, Mr. Ruecker said that the “rapidly rising U.S. inventories should keep the spread between Brent and WTI prices unusually wide in the near term.”

While it might be unusual for the past year, the gap between the two crudes is actually a return to a more normal state of affairs. As rising U.S. production has created a glut of oil in North America in recent years, Brent has mostly traded at a premium to WTI, with the spread widening at times to as high as $28 in 2011. On Thursday, Brent was trading $11.70 above the U.S. marker.

The price gap seems to be aiding the strategy of Organization of the Petroleum Exporting Countries, which last year decided to keep its output steady in a bid to defend market share against the booming U.S. shale industry. Most OPEC producers’ selling prices are based on Brent, while the U.S. shale industry is linked to WTI.

“OPEC producers have seen revenues, based on Brent crude, rise while U.S. shale producers continue to struggle to reach breakeven at current low WTI levels,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Current oil prices are undoubtedly still very painful for most OPEC producers but they will take comfort from the fact that it could have been a lot worse had the spread to

WTI not begun to widen.”



19 Comments on "Global Oil Price Yardsticks Tell Different Stories"

  1. Plantagenet on Sat, 28th Feb 2015 4:59 pm 

    The oil glut is still depressing US oil prices. Brent is doing a bit better, but oil prices there are still far below where they were before the oil glut caused the global oil price collapse.

  2. GregT on Sat, 28th Feb 2015 7:01 pm 

    Gasoline prices here at the pump today reached $1.30/L. The same price as gas was back at the beginning of October 2014, and 7 cents a litre higher than 3 days ago.

    Prices continue to rise.

  3. BobInget on Sat, 28th Feb 2015 7:49 pm 

    US oil prices need to play catch-up with Brent before hoarded stashes are let go to markets. Some may already be steaming East.

    With one refinery down several more on strike
    it will take warmer weather to release arbitraged inventory holding NYMEX in check. IN March winter mixes go and summer
    blends come in. Refineries close for this change over. Inventories will continue to rise as planned with fewer then 80% of refineries
    going strong. With US demand at around 20 million p/d projected, it will be but a matter of weeks before SPOT shortages appear.

    Push comes to shove when Asia (India, 8% growth, China 7%) gobbles up all the free lance stuff around just as spring rolls round here in US. It will be close but we, the US, should still be getting product from Venezuela prior to (until completion) East/West pipelines under construction in Costa Rica and Nicaragua.

    IOW’s unless the ME ballon goes up this year? we should be OK till 2016. After that Venezuelan oil all goes
    to China. Place head between knees and kiss
    your SUV good-by.

  4. BobInget on Sat, 28th Feb 2015 7:54 pm 


    CARACAS, Feb 28 (Reuters) – Venezuelan President Nicolas Maduro said on Saturday his government had captured American citizens involved in “espionage activities,” and said U.S. citizens in the future will have to seek visas to come to the OPEC nation.

    Speaking during a rally, he said his government will prohibit some U.S. officials from entering Venezuela in retaliation for a similar measure by the government of President Barack Obama against a group of Venezuelan public officials.

    “We have captured some U.S. citizens in undercover activities, espionage, trying to win over people in towns along the Venezuelan coast,” he said, adding a U.S. citizen of Latin descent was captured in the convulsed border city of Tachira.

    A spokesman for the U.S. embassy in Caracas said he was unable to comment, citing a lack of any official diplomatic communication with the Venezuelan government.

    The head of a Venezuelan evangelical organization on Friday said a group of four missionaries had been called in for questioning after participating in a medical assistance campaign in the coastal town of Ocumare de la Costa.

    That pastor, Abdy Pereira, on Saturday said in a telephone interview that the four had left the country for Aruba after having been questioned for several days about alleged involvement in espionage. Pereira said the group had been coming to Venezuela 14 years and denied they were involved in espionage.

    The United States and Venezuela have had tense diplomatic relations for more than a decade. Maduro recently accused Washington of helping stage a coup, a charge dismissed by the White House as ludicrous. (Reporting by Diego Ore, writing by Brian Ellsworth; Editing by Bernard Orr)

  5. GregT on Sat, 28th Feb 2015 8:04 pm 

    “The US special services together with their “assistants” from Canada and Great Britain tried again to stage a coup in Venezuela. In the middle of February, Venezuelan President Nicolas Maduro said the national security services frustrated the plans of US embassy and put an end to its hostile actions. As a result, a number of people were arrested, including Venezuelan air force officers and activists of radical opposition. The subversive activities were guided by Western diplomatic missions. The names of those behind the plot are known but they cannot be brought to justice being protected by diplomatic immunity. The President said the plotters wanted to assassinate him. The United States embassy guaranteed that the perpetrators would be granted asylum in America.”

    “Maria Corina Machado was to head the new government. She has been patronized by former US President George Bush Jr. The Machado’s three minute meeting in the White House with the President of the United States in March 2005 attracted unusually high attention of pro-US media. Maria was painted as the most promising politician able to defeat President Hugo Chavez and become a Venezuelan President absolutely loyal to the United States. The revelations about the Machado’s ties with US intelligence services spoiled the plans. She was the founder, former vice president, and former president of the Venezuelan volunteer civil organization Sumate that used US-provided funds. When it was revealed that Machado got large sums of money from special services, she had to keep away from spotlight. Today the United States needs her again. She is ready to go to any length in an effort to overthrow Nicolas Maduro. Washington wants her to lead the country.”

    “After the leading plotters were arrested and their ties with special services and embassies of the United States, Canada and Great Britain were revealed, Nicolas Maduro could say with certainty that another coup attempt orchestrated by Washington was effectively foiled. The tension in the relationship with the United States remains. In December 2014, President Obama endorsed sanctions against top officials of Venezuela accused by Washington of human rights violations. Maduro warned Americans that arbitrary sanctions and other attempts to exert pressure would deteriorate the bilateral relationship even further. He said the United States tried to stage coups in Venezuela a number of times. The US interference into the internal affairs of other countries has become a constant factor to negatively affect the situation in the world.”

  6. Perk Earl on Sat, 28th Feb 2015 11:25 pm 

    From the article at top:

    “Looking at Brent, the global oil benchmark, the price is up more than 30%.”

    That percentage increase would be more impressive if the price of Brent hadn’t fallen so far.

    30% of 115 a barrel = $34.50
    But 30% of 48 a barrel is only = $14.40

  7. shortonoil on Sun, 1st Mar 2015 6:08 pm 

    We have hit the energy half way point, and that it is fairly simple to demonstrate:

    That means that there is no where for oil to go but down. Prices long term will continue to fall over the next few years:

    The price gap seems to be aiding the strategy of Organization of the Petroleum Exporting Countries, which last year decided to keep its output steady in a bid to defend market share against the booming U.S. shale industry.

    OPEC had no choice but to keep production constant, and US shale production has not affected their market. They were, and are selling all the oil that they can produce, and the US is buying the same amount from them that is has for the last few years.

    The present oil price crisis is not about Brent versus WTI, and neither one of them are winning. This about depletion, and as the price continues to fall over the next few years the Wall Street Journal will find its pacifying commentary growing ever flimsy!

  8. marmico on Sun, 1st Mar 2015 6:50 pm 

    December 2014 compared to 2012

    GDP; $17.701 trillion *1
    The price of WTI; $55/ barrel
    Petroleum consumption; 19,517,000 barrels/day = 7.124 Gb/ year *2
    % energy consumption from petroleum, EIA; 35.1% *3
    Total US crude cost = $391.82 billion (consumption x price)

    Method 1

    Converting $391.82 billion of crude consumed into goods and services required: $391.82/0.2045 = $1.916 trillion.
    35.1% x GDP = $6.213 trillion

    Percent of total petroleum dollars used to extract, process, and distribute it: $1.916 trillion/ $6.213 trillion = 30.8%

    Extraction, process and distribute oil declined from 54.7% to 30.8%.

    It is fairly simple to demonstrate that the ETP is worthless.

  9. shortonoil on Sun, 1st Mar 2015 7:31 pm 

    US data for 2012:

    GDP; $16.1632 trillion *1
    The price of WTI; $94.05/ barrel
    Petroleum consumption; 18,490,213.6 barrels/day = 6.7489 Gb/ year *2
    % energy consumption from petroleum, EIA; 35.1% *3
    Total US crude cost = $634.73 billion (consumption x price)

    Not only a troll, a lying deceitful little troll. He took the numbers from the site, and changed them. Check it out!

    A complete sack of S***!

  10. shortonoil on Sun, 1st Mar 2015 7:52 pm 

    2014 WTI $93.26

    Didn’t check your other numbers, you probably made them up also.

  11. Davy on Sun, 1st Mar 2015 7:54 pm 

    Short, take that as a compliment. Marmie, is showing his frustration. You know you gottem when they start attacking you. If your message had no substance would he show any effort! Good job Short!

  12. marmico on Sun, 1st Mar 2015 7:58 pm 

    Who is the worthless sack?

    All that happened is that I up dated GDP, petroleum volumes and price to the December 2014 ETP formula data points and then annualized it. January and February 2015 up dates will print lower than the December 30.8% ETP number as the price of WTI was lower.

    The ETP is worthless.

  13. shortonoil on Mon, 2nd Mar 2015 6:55 am 

    Marmico I’d love to know who you are? Our web host doesn’t register your entry to the site. You are working for someone with some pretty sophisticated cloaking software. You are no beer drinking Joe Six. You’ve got some big guns behind your trolling! They are out there to pervert the net, and there is a lot of money behind them. Oil company, NSA, HLS who are you working for Marm?

  14. marmico on Mon, 2nd Mar 2015 9:07 am 

    The ETP formula is worthless. Get over it. It’s arithmetic not Watson on Jeopardy.

    There is an inherent contradiction between the ETP formula and the ETP narrative since the derived ETP formula number is positively correlated with the WTI price. Higher price = higher ETP. Lower price = lower ETP.

    Back of the envelope arithmetic markers for 2015:

    ETP = 25% @ $45WTI, 50% @ $90WTI, 75% @ $135WTI.

    Give me a price for any of the 10 remaining months in 2015 and I’ll solve the monthly ETP number within a margin of error of 1 percentage point. If August WTI = $67, August ETP = 37.5%.

    January 2015 is scary. The ETP will clock in at ~26%. LOL

  15. GregT on Mon, 2nd Mar 2015 9:36 am 

    I used to believe that Marmico was merely in a state of denial. Lots of that going around these days for sure. The thing is, Marmico does appear to posess higher than average intelligence, which should beg the question; Why does he continually reference government generated statistics?

    Anyone with the ability to think rationally knows that government stats are manipulated. Given that Marmico refuses to consider this fact, and he continually ignores the reality of economic contraction around the globe, his motives are highly suspect.

    I think that you’re correct Short, Marmico has a hidden agenda. It would be very interesting to find out who, exactly, this guy is really working for.

  16. Northwest Resident on Mon, 2nd Mar 2015 9:45 am 

    marmico has been discredited and proven wrong so many times on this forum that it isn’t even worth the time to try to make sense of whatever it is he’s saying. Combined with his obnoxious and insulting demeanor, the only logical conclusion is that marmico is here to sow discord and confusion and to make an ass out of himself.

    During the last presidential election, I read documented reports that large numbers of TOTAL LOSERS had been employed by mysterious funding sources to take to the internet opinion boards and political forums, to spread lies and create chaos — to corrupt and disrupt the exchange of ideas and discussions of valid topics wherever those might be found. Probably, marmico is one of those trolls, a LOSER of epic proportions who has nothing better to do with his time than what we see him doing on this forum.

    marmico clearly has an agenda, and that agenda is most definitely NOT to seek the truth.

  17. Northwest Resident on Mon, 2nd Mar 2015 9:49 am 

    GregT — I’m not so sure that marmico is all that intelligent, to be honest. He has on several occasions used BIG words that he clearly didn’t even know the meaning of, or how those BIG words should be used. He was just throwing BIG words around to make himself appear BIG. And on at least two other occasions, he has attempted to use a BIG word, but the word he attempted to use was not actually a word at all — just something he made up and THOUGHT was a BIG word. And you do have a point, which is, anybody quoting government statistics like marmico does so frequently is deservedly suspect in the intelligence department.

  18. GregT on Mon, 2nd Mar 2015 9:57 am 


    I said “higher than average intelligence”. That does not necessarily imply that marmico is smart. If his IQ was 99, he would still be of higher intelligence than most people.

  19. Davy on Mon, 2nd Mar 2015 10:11 am 

    Marm, you fail to go to the next level of what POD & ETP signify and that is depletion above ground, below ground, and the disruptive systematic effects of more expensive oil. ETP is a scientific attempt to describe depletion. It gets to the heart of the matter as described here “It is the total energy needed to extract, process, and distribute a unit of petroleum. It is a computed value derived from the solution of a thermodynamic equation”.

    ETP is one more fact in the depletion of oil’s ability to power BAU. You can pick ETP apart, you can discount it, and you can discredit it. The facts remain that thermodynamically oil is depleting. The best oil is in depletion and unconventional are not replacing conventional oil’s contribution to the economy.

    Marm, If you are unable to acknowledge limits of growth and diminishing returns then you can discount ETP. If you discount ETP and the fact oil is a non-substitutable foundational commodity then you are counting on technology, efficiency, and innovation to save the day. If technology, efficiency, and innovation are going to save the day why are interest rates at zero for multiple years now? Why is every major economy monitarizing debt at levels never seen before for multiple years now? Why are nearly every sovereign major power functionally insolvent for multiple years now?

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