For many years, Brent crude oil sold a a very similar price to West Texas Intermediate crude oil. The former is the benchmark price for oil in Europe; the latter for the U.S. In the early years of the Brent field (between Great Britain and Norway in the North Sea), Brent sold at a discount to WTI. Thereafter they sold at parity. In the last year, Brent has opened a big premium up over WTI, averaging $27 for one recent month. What happened to arbitrage and the Law of One Price? A glut of oil in cushing, OK where the market for WTI is and a shortage in Europe.
That is about to change.
Chip Cummins reports in the Wall Street Journal that Entbridge of Canada is buying the recalcitrant half of Seaway pipeline and will reverse its flow south. Let the arbitrage begin!
This means lower margins for Kansas refiners, higher income for Kansas oil producers, and probably higher local gasoline prices.
WSJ's Liam Denning and Mean Street host Evan Newmark discuss WTI's price spike back over the $100 per barrel mark on news of a Canadian company's investment in a gulf coast-to-Oklahoma pipeline.