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Spread between WTI and Brent Increases as Cushing Overflows

Oil prices have been declining. West Texas Intermediate (WTI) crude oil (quoted in terms of delivery in Cushing, Oklahoma) has fallen to $91.97 per barrel according to Bloomberg. Prices for Brent crude has fallen to $100.39 per barrel.

However national gasoline prices have only declined to $3.64 per gallon according to gasbuddy.com (graph at bottom).

For the last few years there have been some capacity issues at Cushing (see Jim Hamilton's post Prices of gasoline and crude oil for a discussion of the issues).

As Hamilton noted:

[A]n increase in production in Canada and the central U.S. combined with a decrease in U.S. consumption has led to a surplus of oil in the central U.S. This overwhelmed existing infrastructure for cheap transportation of crude from Cushing to the coast, causing a big spread to develop between the prices of WTI and Brent.

Click here to read the full article.



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