BL: WTI Prices Don't Reflect International Oil Market, Study Says
By Margot Habiby
April 13 (Bloomberg) -- Wholesale West Texas Intermediate crude oil, the U.S. benchmark, is no longer a gauge of the international oil market and may not be for years, according to a Lehman Brothers Inc. report today.
Prices of the grade, which is traded on the New York Mercantile Exchange futures market, are being depressed by a lack of storage at Cushing, Oklahoma, where WTI is delivered, competing supplies from Canada, refinery outages and difficulty in moving the oil elsewhere, the report said.
West Texas Intermediate prices ``represent local fundamentals for crude oil in the U.S. mid-continent, putting a question mark over the value of this inland U.S. crude as a world market for hedging speculation,'' said the Lehman analysts, led by New York-based Edward Morse.
The grade can still be useful when it comes to pricing crude oil far out into the future, though ``it's lost its utility'' for near-term pricing, the report said.
``WTI is not going to disappear as a U.S. benchmark,'' said Morse in an interview. ``It has a lot of liquidity.''
Until new pipelines are built or old ones are reversed to take oil out of Cushing, ``WTI will likely trade at a discount to waterborne crudes, ignoring freight, and Cushing is likely to be flush with inventory,'' the report said.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.
Last Updated: April 13, 2007 13:55 EDT
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