NYMEX & Brent Crude prices

sgiitk · 5th July 2011, 15:44

We have all seen that Brent Crude prices are about 10-15% higher than NYMEX Crude.

I hear that till about two years ago they used to be about the same. Nw I have two questions:
1. Why the difference?
2. What stops an arbitrage specialist from taking advantage of the difference.

I hope some expert will explain.

(I may have posted it this afternoon, since I had a power glitch at a critical moment, and could not find it, here I go again)

thedreamcatcher · 5th July 2011, 17:28

NYMEX, or actually WTI Crude has on an average been at par or higher than Brent and serves as a benchmark index for the US geography (Though this is also ridiculed). In this decade, I believe there were 2 instances of it going lower than Brent. One is now, in 2011 and there was another time as well, I cant recollect now.

WTI or West Texas Intermediate oil is produced and stored in abundance in the Cushing region and further, it cannot be shipped across the borders due to various limitations, including pipeline limitations. As far as the current scenario and the fall is concerned, they (at Cushing) apparently have very high levels of produce and hence have over supply at this point in time, and as they cannot send it out of the US, prices have fallen.

sgiitk · 11th July 2013, 14:46

Now finally they seem to be converging again. This morning the differential was down to under $2. Remember the peak was something like $25 about a year and a half ago.

sgiitk · 22nd July 2013, 17:24

On Sunday morning I saw $108.30 for Brent and $108.47 in other words Brent < WTI. so @thedreamcatcher; finally what you have said has come to pass.

5th July 2011, 15:44	#1
sgiitk BANNED Join Date: Dec 2007 Location: Gurugram Posts: 7,969 Thanked: 4,788 Times	NYMEX & Brent Crude prices We have all seen that Brent Crude prices are about 10-15% higher than NYMEX Crude. I hear that till about two years ago they used to be about the same. Nw I have two questions: 1. Why the difference? 2. What stops an arbitrage specialist from taking advantage of the difference. I hope some expert will explain. (I may have posted it this afternoon, since I had a power glitch at a critical moment, and could not find it, here I go again)
	() Thanks

5th July 2011, 17:28	#2
thedreamcatcher Senior - BHPian Join Date: Mar 2009 Location: Dubai Posts: 1,204 Thanked: 66 Times View My Garage	Re: NYMEX & Brent Crude prices NYMEX, or actually WTI Crude has on an average been at par or higher than Brent and serves as a benchmark index for the US geography (Though this is also ridiculed). In this decade, I believe there were 2 instances of it going lower than Brent. One is now, in 2011 and there was another time as well, I cant recollect now. WTI or West Texas Intermediate oil is produced and stored in abundance in the Cushing region and further, it cannot be shipped across the borders due to various limitations, including pipeline limitations. As far as the current scenario and the fall is concerned, they (at Cushing) apparently have very high levels of produce and hence have over supply at this point in time, and as they cannot send it out of the US, prices have fallen. Last edited by thedreamcatcher : 5th July 2011 at 17:30.
	(1) Thanks

11th July 2013, 14:46	#3
sgiitk BANNED Join Date: Dec 2007 Location: Gurugram Posts: 7,969 Thanked: 4,788 Times	Re: NYMEX & Brent Crude prices Now finally they seem to be converging again. This morning the differential was down to under $2. Remember the peak was something like $25 about a year and a half ago.
	() Thanks

22nd July 2013, 17:24	#4
sgiitk BANNED Join Date: Dec 2007 Location: Gurugram Posts: 7,969 Thanked: 4,788 Times	Re: NYMEX & Brent Crude prices On Sunday morning I saw $108.30 for Brent and $108.47 in other words Brent < WTI. so @thedreamcatcher; finally what you have said has come to pass.
	() Thanks