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Crude oil prices measure the spot price of various barrels of oil, Benchmark oils are used as references when pricing crude oil. There are up to 161 different benchmark oils, of which the major three are West Texas Intermediate, Brent Crude and Dubai Crude.

West Texas Intermediate (WTI) crude oil is of very high quality with high gasoline yield. Its API gravity is 39.6 degrees, which makes it a “light” crude oil, and it contains only about 0.24 percent of sulfur (impurity) making a “sweet” crude oil.

Brent Blend is a combination of crude oil from fifteen different oil fields located in the North Sea Brent Crude. It is a light oil and also classified as a sweet crude. It has an API gravity of 38.06 and contains
0.37% sulfur.

While WTI offers the benchmark price for U.S. market, Brent is the reference price benchmark for international market. Dubai crude and OPEC basket track very closely to Brent. WTI and Brent share a similar quality (with WTI slightly of higher quality). For this reason, they should price very closely to each other.

Historically, the price difference (also called the spread) between Brent and WTI has been based
 on differences in crude oil quality and short-term variations in supply and demand. Typical price difference per barrel between the two benchmark oils was +/-3 USD/bbl.

However since 2010 Brent has been priced much higher than WTI, reaching above $23 in August 2012.

The average Brent-WTI price spread in 2012 was about $19 per barrel, and the spread was at record high of $23 per barrel between August 2012 and February 2013. According to the US EIA (Energy Information
Administration) the high price spread between WTI and Brent was attributable to an oversupply of crude oil in the interior of North America (WTI price is set at Cushing, Oklahoma) caused by rapidly increasing oil production from Canadian oil sands, North Dakota Bakken shale Formation and Texas Eagle Ford Formation.

Oil production in the interior of North America has exceeded the capacity of pipelines to carry it to markets on the Gulf Coast and east coast of North America where the refineries are concentrated. As a result, the oil price on the US and Canadian east coast and parts of the US Gulf Coast since 2011 has been set by the price of Brent Crude, while markets in the interior still follow the WTI price. Much US and Canadian crude oil from the interior is shipped to the coast by railroad, which is much more expensive than pipeline.

Since March 2013 though, prices for these benchmarks have moved much closer together, as WTI increased in relation to Brent. This increase in the WTI price was the result of increase US pipeline infrastructure and US refineries running at near-record levels of capacity utilisation.

The current increase in spread can be traced to the escalating crisis in Iraq and Ukraine which trades anticipate could disrupt supply.

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