Battle of the Benchmarks: Brent Crude Oil and West Texas Intermediate

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This article examines the evolution and relationship between these two benchmarks and what factors have impacted their prominence as a benchmark.

Greg Leonard, Nicole Moran, and Laurent Samuel of Cornerstone Research coauthored an article titled “Battle of the Benchmarks: Brent Crude Oil and West Texas Intermediate.” A link to the full article appears at the bottom of the page.

Brent Crude Oil (Brent) and West Texas Intermediate (WTI) are the two leading global benchmark references for crude oil prices. Historically, the two have often tracked very closely to each other, without significant price variations. The exceptions were the period between 2011 and 2015, when prices for the two diverged dramatically, and, to a lesser extent, the period since mid-2017.

Spread between WTI and Brent Futures Prices 1/1/2000-2/28/2019

One reason for the first price divergence was the growth of U.S. crude production of WTI. Without the necessary infrastructure or regulatory certainty to facilitate crude exports from the U.S. and provide an outlet for this additional supply, WTI prices decreased relative to Brent, and trading volume in Brent futures contracts overtook WTI futures. Between 2015 and mid-2017, however, both infrastructure and regulatory changes in the U.S. led to price parity becoming the norm again.

In mid-2017, prices began to diverge a second time as increases in crude prices led to a renewal of production growth and also contributed to a destocking of U.S. crude inventory. These and other market factors have caused the battle for benchmark supremacy to heat up again. In this latest round, WTI futures volumes are overtaking Brent futures.

This article examines the evolution and relationship between these two benchmarks and what factors have impacted their prominence as a benchmark.


The views expressed in this article are solely those of the authors, who are responsible for the content, and do not necessarily represent the views of Cornerstone Research.

Battle of the Benchmarks: Brent Crude Oil and West Texas Intermediate

Authors

  • London

Greg Leonard

Senior Vice President

  • Washington

Nicole M. Moran

Principal

  • Washington

Laurent Samuel

Manager