Both of these characteristics make them easier to refine and more attractive to petroleum product producers. WTI is the benchmark crude for North America. Brent crude is traded internationally, so the delivery locations will vary by country. Since both types of oil are used as benchmarks, different countries will use them in different manners. Asian countries tend to use a mixture of Brent and WTI benchmark prices to value their crude oil.
Brent and WTI crude have different properties, which result in a price differential called a "quality spread. This is referred to as a "location spread. The nominal price of crude oil is just one factor involved in understanding the crude oil market. Political shifts, weather events, and global health crises have been some of the biggest shock factors in the oil market. Because of the coronavirus outbreak, the International Energy Agency cut its forecast for global oil demand in March , predicting the first year-over-year decline in demand since To understand how world events can cause the spread between Brent and WTI to move dramatically for long periods, look back a few years.
At the start of , the Brent-WTI spread was close to flat. The spread widened during , with Brent trading at a premium compared to WTI. Around the time that the Arab Spring an uprising across much of the Arabic region began in Egypt in February of , the spread widened.
Fears concerning the closure of the Suez Canal and a lack of available supply caused Brent crude oil to become more expensive than WTI. As tensions eased over the canal's operation, the spread reduced.
In , a premium drop for Brent occurred for two reasons. First, an agreement with Iran was struck, allowing the country to export more oil, which should have increased the amount of Iranian crude flowing into the market on a daily basis.
Since Brent is the pricing benchmark for Iranian crude, this development depressed the price of Brent at the time. Second, U. With expanding support for exporting U. It is important to notice that mere anticipation of an influx of oil into the market was enough to cause price fluctuations.
Weather, too, can have drastic effects on prices. In , hurricanes led to sharp rises in oil prices, as refineries and production facilities shut down for the duration of the weather events. Each contract is worth 1, barrels of Brent crude oil. It is traded in U. Brent crude is refined all over the world by the refineries that purchase the barrels of crude oil. There are only a handful of countries that can exceed that amount today. So, it was only recently that U.
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