Hello all,
Just a quick one,
When looking at oil prices, which one is more applicable, Brent, West Texas, or Heating Oil?
Or all three?
Thanks in advance.
They all move somewhat together, but they are also separate enough to have their own set of items that influence them.
For example a huge storm in the North Sea or a refinery fire in Europe will affect Brent, but leave the other two unchanged whilst lots of snow in North America will increase demand for heating oil and reduce demand for WTI if no-one is driving…
Ah thank you very much!
Makes sense!
I’m sure there must be more places in the world searching for oil though, why can I only find prices for these three types? don’t the other area’s of the world with oil rigs, trade on the commodities markets?
There other places that drill and sell oil, the main areas being the Middle East and Asia.
Middle Eastern oil can affect both Brent and WTI pricing, as well as Tapis pricing that is what the Asian market uses.
Tapis is not exchange traded, though, so you won’t see it readily quoted.
Another thing to remember is that Brent and WTI prices are ‘well head’ prices and downstream flow restrictions can also affect the pricing. This is why there WTI-Brent price disparity is much higher than historical values. The WTI well head has plenty of supply, but restrictions on getting it out of there so you don’t have to go very far downstream to find a much higher price.
Heating oil and unleaded petrol prices (like others) are post refinery products so a well head restriction won’t affect them if they have good back up stocks, but they can be affected by a refinery workers strike, or other disruption.
Also remember there is a political side to pricing too. In Sept and Oct the US Govt released some, and threatened to release more, of its strategic reserve to keep petrol prices low at the pump in the run up to the election.
Thank you for taking the time to inform me. Appreciated.