- The discount of WTI Crude to the international benchmark Brent Crude has dropped from nearly $20 per barrel in the early 2010s to below $3 a barrel today.
- Increased domestic offtake capacity and better pipeline connections to Texas and Louisiana make WTI a more influential benchmark in global oil markets.
- WTI Midland was added to the Brent basket in June 2023 and has been a major driver of the surging U.S. crude oil exports over the past year, especially to Europe.
Soaring shale production, expanded pipeline networks in the U.S. Gulf Coast, and rising exports of American crude has made the U.S. benchmark crude price, WTI, a force to be reckoned with in the global oil market.
The discount of WTI Crude to the international benchmark Brent Crude has dropped from nearly $20 per barrel in the early 2010s to below $3 a barrel today.
Before the U.S. allowed in 2015 crude oil exports to international markets other than Canada, soaring American production during the first shale revolution in the early 2010s was capping the price of WTI oil, which traded at a $15-$20 per barrel discount to Brent, the benchmark price of the oil pumped in the North Sea.
Significant midstream bottlenecks and the fact that U.S. crude was being exported only to Canada meant that Brent Crude commanded a wide premium over the price of American oil.
But after the U.S. allowed crude oil exports in 2015 and after midstream operators seized the opportunity to build pipelines in Texas and Louisiana leading to the U.S. Gulf Coast export terminals, American exports soared and made WTI a more influential benchmark in the oil markets.
U.S. crude oil exports have surged from around 400,000 barrels per day (bpd) – nearly all to Canada – back in 2015, to more than 4 million bpd this year, with the customer base expanding to Europe and Asia.
Since 2016, U.S. crude oil production has soared further and the U.S. became the world’s largest oil producer in 2018, surpassing Russia and Saudi Arabia, which have meanwhile restricted supply to the market as part of the OPEC+ agreements. The OPEC+ pact was formed in late 2016 and began managing the members’ production to keep oil prices steady after the 2015-2016 oil market crash.
Even without these OPEC+ agreements, the U.S. would still have been the world’s largest crude oil producer—it now more than 13 million bpd, while Saudi Arabia and Russia don’t even have that level of production capacity.
So influential has the U.S. oil become that WTI Midland, produced in Texas, was included last year in the Dated Brent part of the Brent benchmark as one of several grades underpinning the contract.
WTI Midland was added to the Brent basket in June 2023 and has been a major driver of the surging U.S. crude oil exports over the past year, especially to Europe.
The WTI crude oil included in determining the Dated Brent price is delivered into Rotterdam, a large crude oil storage and trading hub in the Netherlands. As a result, the Netherlands received more U.S. crude oil exports than any other country in 2023, averaging 652,000 bpd, per estimates from the U.S. Energy Information Administration (EIA).
As U.S. crude oil production defied forecasts of a significant slowdown in growth last year and hit new highs, again, exports from America increased—to a record-high level since the U.S. ban on most crude oil exports was lifted in 2015.
U.S. crude oil exports averaged an all-time high of 4.1 million bpd last year, having jumped by 13%, or by 482,000 bpd, from the previous record set a year earlier, in 2022, EIA data showed earlier this year. Except for 2021, U.S. crude oil exports have increased every year since the ban on most exports was lifted in 2015.
Last year, Europe became the largest buyer of U.S. crude oil, following the Western sanctions on OPEC+ producer Russia over its invasion of Ukraine.
The soaring U.S. exports and the rising influence of WTI in the physical oil market trades have made American crude an influential force globally.
While a narrow differential of WTI to Brent means higher netbacks for U.S. oil producers, it means higher U.S. gasoline prices, analysts say.
“A wider spread often means lower prices for US consumers and higher prices for European consumers, while a narrower spread tends to align these prices more closely,” Marc Pussard, head of risk at APM Capital, told The National.
Rising U.S. oil production, the potential of additional deepwater ports in the U.S. Gulf Coast coming online to handle supertankers, and an expansion of the midstream network in Texas could further raise the importance of WTI crude in the global oil market.
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