« Say It Ain't So Joe | Main | S&P 1500 Stocks With the Highest Short Interest »

Brent-WTI Spread Blows Out to Record Levels

There's been a lot of discussion recently regarding the Brent - WTI crude oil spread.  For those unfamiliar with the term, the spread refers to the difference in price between Brent North Sea crude oil and the West Texas Intermediate crude oil futures contracts.  While these two contracts have historically closely tracked each other, in recent months the two paths have diverged.  As shown in the chart below, beginning in January Brent crude oil has started to become increasingly more expensive relative to WTI crude.  In fact, at current levels the spread is now at record levels and over $20 per barrel.

What's behind the large spread in futures contracts that essentially track the same thing?  While there does not seem to be one specific reason, some of the more widely circulated explanations for the widened spread are the unrest in the Middle East disrupting supplies in Europe, excess supplies in Cushing, Oklahoma (the delivery point for WTI), and decreased demand in North America while demand in other parts of the world is increasing.  While any number of factors are in play with the wider spread, at some point it will become wide enough to make for a very profitable arbitrage.

 Subscribe to Bespoke Premium to receive more in-depth research from Bespoke.

References (1)

References allow you to track sources for this article, as well as articles that were written in response to this article.
  • Response
    Response: check over here
    Excellent Web-site, Preserve the fantastic job. Thanks!

Reader Comments (2)

Wow, great arbitrage opportunity. Where can I get the chart in your post?


June 13, 2011 | Unregistered CommenterKane

........and the spread is not being arbbed now? (aren't there programs slicing and dicing steenths in million share amounts in virtually every major market all over the financial world everyday?)

June 14, 2011 | Unregistered CommenterGreg Kelleher

PostPost a New Comment

Enter your information below to add a new comment.

My response is on my own website »
Author Email (optional):
Author URL (optional):
Some HTML allowed: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <code> <em> <i> <strike> <strong>