Oil prices didn’t fall much…
Oil prices slided on Friday…
For years WTI has been the global benchmark for oil, yet now it seems as though Brent will finally overtake it and become the hedge of choice for investors around the world, including in the US.
The reason that Brent is being preferred to WTI is that it is thought to follow more closely the movements of global risk to the oil market. Saudi Arabia, amongst many other producers has dumped the US grade oil, as have refiners, consumers, and hedge funds.
It has even gotten to the point now where Ian Taylor, the head of Vitol (the world’s largest oil trading company), asked at a recent industry conference, “can we all just forget about WTI? It's no longer an international currency of any value whatsoever.”
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The average volume of Brent futures traded on the InterContinental Exchange in 2012 is now more than the WTI futures traded on the New York Mercantile Exchange, by 30,000 lots a day.
The volume of Brent options has also increased massively, and whilst the market is still only about a quarter of the size of the WTI options market it has grown by more than 300 percent in 2012.
Jack Kellett, the head of oil at GFI Group, has remarked that “even U.S. mid-sized producers have begun switching from WTI to Brent in their hedging programs.”
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com