Thursday, February 17, 2011

Dennis Gartman on the Brent-WTI Spread

As most people have noticed or heard, there is an extreme difference between the West Texas Intermediate (WTI) crude price and Brent crude. One of the main reasons for the difference is the congestion at the WTI pricing hub in Cushing, OK. Being from Oklahoma it doesn't surprise me too much that Cushing has record inventories considering the companies have been busy building extra storage tankers in Cushing the last few years.

So if they build more storage tankers, wouldn't it naturally hold higher inventory levels then in the past? The market always seems to have issues with digesting news that should've been expected at some point. Honestly I don't fully understand the issue and it seems natural that if oil is treated better in Europe that explorers in Canada of the Gulf will eventually send the oil to where it is treated better such as Europe. 

Interesting discussion by commodity expert Dennis Gartman. It doesn't sound like shipping the oil from Cushing to Houston via rail or truck is a viable idea. Check the conversation about 2 minutes into this clip on CNBC. Not really sure how to take advantage of this story other then explorers that sell into non-US markets will make a lot more money.  Something to watch for now. 





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