As prices slump, Nymex oil seen losing relevance

[FarCenter]

With WTI futures below international prices, are they a 'broken benchmark?'

By Moming Zhou, MarketWatch http://www.marketwatch.com/news/story/Nymex-oil-loses-glow-international/story.aspx?guid=%7B00C1AF3A%2D52C4%2D44DE%2D860E%2DF8620447A9E9%7D#comments

NEW YORK (MarketWatch) -- A build-up in inventories at the delivery point for Nymex crude futures has pushed prices of the oil benchmark to an unprecedented discount to a rival futures contract -- which is calling into question Nymex oil's role as an international price-setter. West Texas Intermediate crude, the oil that the New York Mercantile Exchange uses as a benchmark, is trading at its largest discount ever to Brent crude, the European benchmark. That's a reversal of the norm: WTI usually trades at a higher price because of its superior quality. Because WTI is lighter and contains less sulfur than many types of crude, it costs less for companies to refine it into oil products, and therefore it usually sells at a higher price

WTI futures are also cheaper than prices charged by the Organization of Petroleum Exporting Countries, whose oil tends to be lower in quality and thus typically fetches a lower price. This recent reversal in prices has prompted at least one prominent energy agency and some market analysts and investors to suggest Nymex oil is losing its influence as a global benchmark.
"Volatile WTI is sending mixed and misleading price signals not only to the market but to economic forecasters, government officials and policy makers," the International Energy Agency wrote in a report released last week.

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WTI's pricing anomalies have upended the crude's value as a basis for setting physical prices, the IEA noted in its report.
On Tuesday, front-month Brent futures closed at $41.03 a barrel on the IntercontinentalExchange, while front-month WTI ended at $34.93 on the Nymex.

The weakness in WTI futures has stemmed from excessive inventories at Cushing, Okla., the delivery point for Nymex futures. WTI has traded lower than Brent before, but this time the gap is particularly wide: It hit more than $10 last month, the most since Brent and WTI began trading in the futures market. The artificially low WTI prices mean oil users could pay a much higher price than WTI when they trade physical oil with producers. It also means investors putting money in Nymex futures or oil exchange-traded funds linked with Nymex could see prices rally when Cushing inventories wane, as the Nymex contract rises back above levels of Brent and other global contracts.

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[jpak]

1. Teh Free Markit at werk

We needs to get earl back up to $147 a barrel to bring gasoline prices down....

WTF

[Historic NY]

2. Can't show me that its not manuplicated...gas is cranking up here $2.07 regular.