Price Difference between Brent and Light sweet crude

[ludo]

Hi

Light sweet crude usually trades at about a dollar higher than Brent crude. Noticed the other day that this situation has just reversed and Brent is now around 60 cents higher. Anyone know if this happens often and why?

Thanks

 

[jimbo57]

Hi

Light sweet crude usually trades at about a dollar higher than Brent crude. Noticed the other day that this situation has just reversed and Brent is now around 60 cents higher. Anyone know if this happens often and why?

Thanks

It can happen for a variety of reasons, paticularly if crude supplies in the US are plentiful and they do not need to arb marginal barrels from Europe (as is the case currently), then the natural floor in this spead is removed. I seem to remeber it went negative in the first quarter last year.

 

[ludo]

surely if the US is not buying European crude this would lower the cost of Brent as opposed to push it higher?

 

[jimbo57]

surely if the US is not buying European crude this would lower the cost of Brent as opposed to push it higher?

no- Brent and brent related NSea crudes have a natural home in Europe- if the US needs to import incremental it must price WTI sufficiently above brent to attract economic movement of barrels. If it soesnt need them it doesnt have to do this.

Physical brent is currently trading about $1.50 under the Brent futures

 

[Directional]

interesting stuff jimbo57...
any pointers on where I can learn a bit more about the economics and fundamentals of the oil markets?

 

[jimbo57]

interesting stuff jimbo57...
any pointers on where I can learn a bit more about the economics and fundamentals of the oil markets?

Hi arb, there are no books or anything that explain this stuff. I worked in the oil trade biz for about 20 years, physical and futures, thats the only reason I see this stuff, from old contacts etc.

Take a look at theoiltrader.com, and pm me for info.