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TradinMadMan

Registered: Jan 2007
Posts: 208

03-11-12 04:38 PM

I often hear Stephen Schork say that the U.S. refiners pay Brent prices for oil. If this is the case, then who purchases the WTI? Can someone expound on this or perhaps direct to more info about this?

Thanks.

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FrankSlaughtery

Registered: Aug 2010
Posts: 811

03-12-12 11:03 AM

refiners w/ refineries in the midwest can buy wti really cheap (well cheap compared to brent about $18 less per bbl). gasoline and oil is a very local market despite what some may think. if you can't move the oil/gasoline then the price of brent doesn't matter as much as you might think it would.

another example of energy prices being vastly diff depending on geography - NG in japan is $18 while here it's around 2.25. again that's b/c the exporting infrastructure isn't built up in the u.s. yet although they're working on it but again it takes years if not at least a decade to build this up - and who knows - after 10 years what happens if the price collapses in the mkt you want to export to? then you've built a huge export facility for billions of dollars that is now the world's largest paperweight.

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