Courtesy of Mish.
In late 2011, Brent traded with a huge 40% premium to West Texas Intermediate (WTI). The spread collapsed to parity in July of 2013, but surged to a 22.5% premium late last year.
The spread went negative again today, but a late day rally in Brent vs. WTI saved the day for Brent as the following chart shows.
Price of Brent Divided By Price of WTI
click on any chart for sharper view
Price of Brent vs. Price of WTI
Betting on the Return of WTI-Brent Parity
The Financial Times spoke of Betting on the Return of WTI-Brent Parity back on October 20, 2011. The reason given at the time seems rather amusing today – expectation the Keystone pipeline would be completed.
The price difference between West Texas Intermediate and Brent crude reached a record high of more than $28 a barrel earlier this month. But, almost unnoticed, the market has started to price a return to the parity between the two benchmarks in five years.
The bet on a return to WTI-Brent parity appears based on progress to build several new pipelines that promise to de-bottleneck Cushing, the key delivery point for the WTI benchmark, and the return of Libyan crude.
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