Change in Brent puts Texas at the center of global energy
Analysts said including a land-based WTI-Midland crude from outside Europe in Brent's North Sea basket makes sense given the growing global importance of Texas crude.Houston is the U.S. energy capital given its abundance of storage facilities, export terminals, refineries and its proximity the mighty Permian Basin, but a change in the makeup of the global benchmark for the price of oil means Houston – and greater Texas – is now essential to the world.
The move comes as both Brent and West Texas Intermediate, the U.S. benchmark, lost heavy ground last month due to concerns about a global financial crisis, with Brent dropping as low as $72.77, while WTI dropped into the $66-per-barrel range., the cartel that dominates global oil production, and allies such as Russia, intend to trim 1.66 million barrels per day from production sent both Brent and WTI contracts sharply higher on Monday.
Permian is also quite similar to the components already in the Brent basket. The Brent basket is made up of low-density, low-sulfur grades of crude oil which makes it “light, sweet” in industry parlance. That gave Permian an edge over Norway’s Johan Sverdrup grade, which is heavier and with a higher sulfur content.
While including a land-based WTI-Midland crude from outside Europe in the North Sea basket may seem a bit radical, Hickin said it makes sense given the growing global importance of Texas crude.It’s radical as well for Texas because it also brings additional exposure and importance to the companies and people involved.