Crude oil: why is WTI cheaper than Brent?


The production cost of Brent crude oil is much higher than that of West Texas medium crude oil. It is believed that the quality of Brent crude oil is better than that of West Texas medium crude oil.

The transportation and storage costs of transporting crude oil to various markets also determine the value of crude oil at the wellhead. Many of its crude oil refineries are located in the middle of the West Texas refinery at lower cost. Brent crude oil is produced in cold and harsh weather, far away from the North Sea and far from the refinery, which requires special and expensive storage and transportation system.

In addition, oil companies all over the world have the practice of exchanging crude oil around the world and establishing mutually beneficial distribution schemes. Crude oil exchange is an important part of the actual transportation, storage and refining of crude oil which affects the market price.

There are more than 10000 (and perhaps more) different named crude oils in the world, all of which vary according to gravity, sulfur content, distillation composition, wax content, viscosity, 60 ° f vapor pressure, and metal content. Most refineries are designed to produce certain crude oils, so they have different valuations for different crude oils.

The United States is now allowed to export wet barrels of crude oil. I believe the first ship carrying us crude oil has left Corpus Christi, Texas. I'm not sure if exporting crude oil from the United States will have that big impact on the market.

WTI stands for West Texas Intermediate, one of the most widely traded futures contracts in the world, but most ordinary people don't know what it stands for.

WTI is a barrel of light sweet oil that can be exchanged in Cushing, Oklahoma. This barrel of oil is inland, and it costs a lot of transportation and pipeline costs to achieve the desired goal.

Most crude oil price variables depend on the expected production of high-value products entering the market and the difficulty of refining specific crude oils. Due to the design of the facilities, some refineries cannot be designed to operate certain types of crude oil. Refineries can take advantage of these so-called crude oil refineries because they can take advantage of these opportunities. The WTI / Brent problem is actually based on earnings and refining differences.

 

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