In February this year, crude oil watchers noticed that the US market was not moving to the fluctuations in global prices. So much so, the price differential between the West Texas Intermediate (WTI), based at Cushing in Oklahoma, and London’s Brent, started widening. By mid-July, the differential peaked to $23 a barrel from $2-3 earlier; it’s now in the range of $20.
In India, where a combination of Brent and Dubai-Oman crude decides the economics of the oil sector, many started wondering whether to drop Brent from the so-called Indian crude oil basket and get WTI instead. After all, it would give an advantage of $20 a barrel to the index that gives a 35 per cent weightage to Brent.
Experts and oil professionals reject the proposition outright. The reason is the same as what global oil watchers usually point to — WTI is not a barometer for the global oil market. “It is a localised inland index and quite disconnected to global trade,” says Victor Shum, managing consultant, Purvin & Gertz, an international energy consultancy.