Brent-WTI price gap to hit $10pb by late 2011
Azerbaijan, Baku, June 24 / Trend A.Badalova /
The price difference between the chief grades of WTI and Brent crude oil will fall to below $10 a barrel by late 2011, the British Capital Economics reported.
"We suspect that this surge reflected a jump in speculative demand, which will have benefited Brent disproportionately as it is now the main benchmark for oil prices in financial markets," Capital Economics' report analysts reads.
The price difference between the U.S. grade WTI and North Sea Brent has risen sharply over the past two years. A significant difference between these grades of oil established in summer of 2010 for the first time, today it exceeds $ 17 per barrel. The price spread peaked earlier this June at nearly $23 per barrel (pb).
According to Capital Economics, " such a high spread between Brent and WTI can therefore be broken down as follows: for Brent's greater attractiveness compared to other non-US crudes as a substitute for Libyan oil, and due to a spike in speculative demand following disappointment at OPEC's failure to boost quotas.
However, all of these elements should diminish over time, starting with the latter as Saudi Arabia raises output regardless. Middle East tensions will also fade (eventually).
By late 2011, British analysts predict the price of Brent below $90 per barrel. The figure is expected to be in the range of $70-$90 per barrel in 2012.
WTI's density is 40-degrees API with a 0.4-05-percent sulfur content. This oil is mainly used to produce gasoline and therefore the demand is high, particularly in the U.S. and China.
Brent crude oil produced in the North Sea is light with a density
38.6-39 degrees API and a sulfur content of up to one percent.