Publications: Notes at the Margin

Applying Gold Thinking to WTI (January 19, 2015)


Dated Brent should sell for a premium of $3 per barrel to cash WTI today in an efficient market. It does not. Dated Brent now trades at a discount of $3 per barrel to cash WTI. WTI’s additional value stems from the ability to store it efficiently. In short, thanks to the unique attributes afforded WTI by the contract’s physical delivery specifications and the availability of storage in Cushing, the crude now shares some characteristics with the gold held by central banks to underpin monetary systems. This week's report provides the details on this development and examines the market implications.


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