US shale oil, Asian demand causes huge WTI, Brent price spread

13 September 2011 22:31  [Source: ICIS news]

HOUSTON (ICIS)--The spread between West Texas Intermediate (WTI) and Brent has widened to more than $20/bbl because of Asian demand for the later, shale oil plays in the US and refineries using heavier grades of crude, a US consultant said on Tuesday.

For years WTI crude stayed about $1-1.50/bbl below Brent, said Jim Peters, the head of downstream consulting Americas for Wood Mackenzie Consulting. He made his comments at the 2011 ChemInnovations Conference and Expo.

“That differential is now almost $25/bbl,” he said. “[WTI] seems to have completely moved away from the microeconomics that we all felt would happen.”

There are three reasons for widening price spread, Peters said.

First, supply has gone up because of several shale oil plays in the US.

Second, many companies have upgraded their refineries to process heavy crude instead of the WTI, which is light and sweet.

Third, Brent crude is mostly sold to emerging countries in Asia, which is driving its pricing up.

Peters said all those factors have combined to increase the supply of WTI while decreasing its price.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Bobbie Clark
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