The U.S. oil prices expand the gap to Brent. The U.S. oil and global fuel benchmarks expanded to the largest gap in the last four months. Oil traders predict an enormous supply on the horizon in the United States of America. What the layperson sees are prices either above or just below the $3 mark per gallon.
What Is WTI-Linked U.S Crude?
WTI – linked U.S. crude is, according to Investopedia, a “lighter”, “sweeter” crude oil that is one of the main global oil benchmarks. WTI is an acronym for West Texas Intermediate. This crude oil is categorized as “sweet” because it contains around 34% sulfur. WTI is also categorized as “light” because it has a lower density than some other benchmark crude oil. The two other major benchmark crude oils are Brent and Dubai Crude. The chemical composition of this crude oil makes it much easier for refineries to work with as it is considered a high-quality product.
What Is Brent?
Brent crude oil is also considered a “light” and “sweet” blend of oils. Unlike WTI-crude, it is extracted from the North Sea. The North Sea is the body of water adjoining the United Kingdom and Norway.
Understanding What Goes On Behind The Pump
After the summer, oil consumption typically drops. This is due to the fact that people are traveling less and the weather is not very hot or very cold in most parts of the United States. The U.S. government has intended to sell the largest amount of crude oil in the past seven years. The sale will take place from its strategic reserves. This is contributing to the gap between the WTI-crude benchmark and the Brent benchmark. US refineries are taking this drop in oil demand to use for seasonal maintenance.
In addition to the typical reduction in oil use, the Delta variant of the coronavirus has played a part in limiting the demand for oil. People are traveling less.
The suddenness of this wide gap is on the heels of a very high-demand summer where many people were traveling. The broad spread between the two benchmarks may spark more interest in the WTI U.S. oil overseas. Unfortunately, the shipments have been affected by quickly spreading restrictions due to the Delta variant.
Traders also anticipate improving demand for overseas crude oil which is keeping Brent prices higher. This is also a contributing factor to the wide gap.
Asia is the largest buyer of US crude oil. However, currently, the Chinese and Indian governments have been competing with the Strategic Petroleum Reserve Offer from the U.S. The Chinese and Indian governments are drawing from their strategic stockpiles, as well. Though most of the oil is sour, it’s being offered to domestic refineries.
Don’t hold firm to any theories behind U.S. oil prices. The prices and the theories behind them change at any given moment.