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WTI Cushing–WTI Midland Spread Drops from Multiyear High

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Nov. 20 2020, Updated 2:12 p.m. ET

WTI Cushing-WTI Midland crude oil spread 

WTI (West Texas Intermediate) is the US benchmark for crude oil trading on the NYMEX (New York Mercantile Exchange). WTI is priced at Cushing, Oklahoma, which is the point of delivery for crude oil futures contracts trading on the NYMEX. WTI Midland is the price of crude oil at the Permian Basin.

The WTI Cushing-WTI Midland spread reflects the pricing difference between a major production area and a major trading hub. The spread was $11.25 per barrel on July 16, compared to $13.25 per barrel on July 9. The spread dropped 15.1% from July 9 to July 16.

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WTI Cushing-WTI Midland crude oil spread

The WTI Cushing-WTI Midland spread reached $15.50 per barrel on July 11, which was its highest level since August 2014. Rising Permian production and the insufficient pipeline capacity to move crude oil out caused the spread to increase. WTI Midland was trading ~$18.50 per barrel lower than Brent crude oil on July 11. Brent is the international crude oil benchmark.

Lower WTI Midland crude oil prices compared to WTI at Cushing and Brent could have a negative impact on oil producers in the Permian Basin. Some of the oil and gas producers operating in the Permian Basin are Concho Resources (CXO), Pioneer Natural Resources (PXD), Apache (APA), Cimarex Energy (XEC), and Diamondback Energy (FANG).

Apache, Cimarex Energy, and Diamondback Energy fell 3.5%, 2.6%, and 0.6%, respectively, from July 11 to July 16. However, Concho Resources and Pioneer Natural Resources rose 2.5% and 0.2%, respectively, during the same period.

The Brent-WTI Midland spread reached $23.11 per barrel on May 31, which was its highest level since August 2014. However, WTI Midland was trading ~$15.00 per barrel lower than Brent on July 16. A decline in the Brent-WTI Midland spread typically reduces Permian oil producers’ price disadvantage to their international oil peers.

In the final part of this series, we’ll discuss the OECD’s crude oil inventories.

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