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London: Brent, used as a benchmark to price crude oil in much of the world, has joined the US crude marker above $100 a barrel, providing a more complete global picture of oil's record run.
Brent futures hit a record $100.53 on Wednesday and the US benchmark, known in the market as WTI, set an all-time peak of $102.08. The US contract first rose above $100 in January.
The latest run-up for Brent, whose physical, forward and futures markets are used for pricing two-thirds of the world's internationally traded crude oil, reflects supply breaks in the North Sea and West Africa. "One could argue that because WTI is landlocked, it may not be the best global benchmark," said Harry Tchilinguirian, senior oil market analyst at BNP Paribas. "But you probably need both benchmarks to have a proper capture of global dynamics."
Brent is based on the prices of Brent crude produced in the North Sea and three other crude oil grades pumped from that region. They are similar in quality to some of the oil produced in West Africa.
Output problems
Oil output in Nigeria, Africa's top exporter, has been hit by militant attacks and sabotage. In the North Sea, companies such as Total SA have shut fields for maintenance, reducing supply. "In the case of Brent, we have got what's been happening in the North Sea in terms of outages and its link to West African crude," said David Fyfe, oil supply analyst at the International Energy Agency. "Those factors are holding up Brent now." In contrast to Brent, US crude is used mainly to price North American crude and some US imports.
Some analysts have argued that Intercontinental-Exchange's Brent is more indicative of the state of the world market than its US counterpart traded on the New York Mercantile Exchange (Nymex).
Most media quote the US crude price, making only a passing reference to Brent. The US crude is usually more expensive partly due to its higher quality.
The question of how much is a barrel of oil became harder to answer last year, when Brent briefly traded at an atypical premium as the US marker was weighed down by pipeline problems in the Midwest. Nymex has defended the WTI contract, saying it accurately reflects supply and demand for the world's largest energy consumer.
Other analysts say that on their own, neither Brent nor US crude gives a picture of trends in the world of oil. "Neither of them are global prices," said Paul Horsnell, analyst at Barclays Capital. "It's a complex of prices and they work together."
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