Nymex-to-Brent spread

[trader_dante]

Hello,

I've noticed in the last few days that Brent has outpaced Nymex rapidly in this sharp move upwards and the spread between the two is now approximately $0.90c.

Doing some research I found a very old article from Bloomberg Energy News that read:

"In a bull market, or a bear market, Nymex crude always tends to outpace the Brent price movements because funds are more active on the New York market,'' said Nauman Barakat, head of the European oil trading desk at Fimat International Banque SA. (Not sure of the date but oil was around $28pb)

However, since I've been watching oil for the last two years, Brent has always traded at a premium to Nymex which I understood to be due to the better quality of the product.

Recently, the spread narrowed and Nymex even traded above Brent - now the spread is widening again.

Does anyone know the reasons for this or have any info they can provide me with? Fair value on the spread for both contracts? Any details of the historic difference between the two? Or even your thoughts on whether this spread may narrow/widen?

Cheers,
Tom

 

[TWI]

The recent premium for Brent over WTI could probably best explained by the recent FX moves. Both markets are priced in dollars but the guys who buy this cr*p in Europe will look at Euro cost as this is the currency in which they sell the refined products, if the margin makes sense then might as well price up.