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The spread between oil traded on NYMEX (USO) and London's ICE (BNO) rises to a record...

The spread between oil traded on NYMEX (USO) and London's ICE (BNO) rises to a record $11.54/barrel as bulging U.S. stockpiles may not reflect tight world conditions. A Valero (VLO) executive laments the NYMEX contract has "almost become irrelevant" as a benchmark.
Comments (3)
  • kmi
    , contributor
    Comments (3967) | Send Message
     
    Can someone tell me if this means we pay for oil in the US at the retail level based on NYMEX or based on BNO?

     

    And does this spread imply that we pay less for oil than those elsewhere in the int'l market?
    27 Jan 2011, 11:33 AM Reply Like
  • mcrobertson
    , contributor
    Comments (7) | Send Message
     
    Most crude processed on the US East Coast (and most incremental run on the US Gulf Coast) are price on a Brent basis. Crude price doesn't set retail price, consumers do. It seems opposite, but fundamentally cannot be. WTI or NYMEX crude is only avail to a handful of refiners. It's a terrible benchmark. So in today's world, demand for products, and product prices, support Brent pricing. WTI is distorted from Brent due to inventories at Cushing. Refinery matinenance, logistical supply changes, etc have driven WTI down to the point where it is "disjointed" from the market. The only two crudes that price at WTI pricing or Brent pricing are WTI and Brent. There are thousands of crudes that all refine differently, and price at differentials to WTI or Brent. Domestic crudes are pricing at significant premium to WTI, closer to Brent alternatives. WTI is just a number for one crude. No more than 5-6 refineries run WTI.
    5 Feb 2011, 02:00 PM Reply Like
  • kmi
    , contributor
    Comments (3967) | Send Message
     
    Thank you for the clarification, this was very enlightening.
    5 Feb 2011, 07:01 PM Reply Like
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