For a commodity as important and widely traded as crude oil, one might think that the factors determining the price and value of it would be fairly rigid—if not set in stone, at least consistent across most markets. In fact, this is not the case. Oil prices are set by numerous organizations that don’t always agree with each other. One example of this is Brent Crude and WTI. Both of these represent benchmark oil prices, but these prices often do not match. Sometimes the difference is minimal, other times significant; either way, it’s worth a look to find out why crude oil prices can sometimes vary as much as they do.
Origin and History
Brent Crude originated from the Brent oilfield, located in the North Sea off the coast of Scotland. While production in this oil field is set to be decommissioned over the next decade, the price indicator that originated there stays with us. Brent Crude is now a classification of sweet light crude oil and is a leading price benchmark for crude oils from the Atlantic basin. West Texas Intermediate, or WTI, is an indicator that originates in the United Sates. WTI crude oil is refined in the American Midwest and Gulf Coast, and is considered sweeter crude than Brent.
Why the Difference?
A number of factors come into consideration when evaluating why Brent and WTI prices can vary, so widely, at times. One important factor is that these two benchmarks are for two different types of oil. Oil from the North Sea tends to have greater sulfur content (which is what determines whether it is considered “sweet” or not) than oil found in Texas. This has historically influenced pricing, with the historical result often having been higher prices for WTI oil. However, as is always the case with oil prices, there are many other complicating factors. For example, the recent supply glut of U.S.-produced oil has caused Brent rates to be higher than they have been in the past. Localized geopolitical events can always impact the price of oil, with volatility in the Middle East not likely to disappear anytime soon.
Two Oil Price Sources
While the future of benchmarks can be uncertain, for now, there remain two major sources for oil prices that are used throughout the industry. At Southwest Process Controls, our high quality fluid control products are relied on by customers throughout the Texas oil region. As conditions in the industry continue to change, our products remain the most sturdy and accurate available on the market. To find out more about how products from Southwest can help your company keep up in a changing oil landscape, please contact us directly.