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80-554: The price of WTI is often included in news reports on oil prices, alongside the price of Brent crude from the North Sea . Other important oil markers include the Dubai crude , Oman crude, Urals oil , and the OPEC reference basket . WTI is lighter and sweeter, containing less sulfur than Brent, and considerably lighter and sweeter than Dubai or Oman. Unlike Brent Crude , WTI crude oil

160-512: A BFOET assessed crude price called Argus North Sea Dated crude price, and ICIS provides the final settlement data to the ICE Brent Index (which ultimately settles ICE Brent futures) since 2015. However, in the early 1990s, Brent and BFOET crude spot markets started to price transactions using assessed Dated Brent prices as benchmark prices, which created a feedback loop that diluted fundamental supply and demand information contained in

240-640: A Crude Diff or 'Dated to Front Line' (DFL) contract, which is a spread contract between Dated Brent and Brent 1st Line Future (the front month future), to hedge the basis risk. So a complete hedge would be the relevant Brent futures contract, and a DFL contract when the futures contract becomes the front month future. This is equivalent to a Brent forward contract and a CFD contract in forward contract terms. Historically, price differences between Brent and other index crudes have been based on physical differences in crude oil specifications and short-term variations in supply and demand. Prior to September 2010, there existed

320-528: A Dated Brent and Forward Month Brent Contracts-for-Difference market increased this vulnerability, and market participants gradually switched to using Dated Brent as the spot transaction reference price by 1988. Brent crude oil contract-for-difference (CFD) is a weekly spread or swap between the Dated Brent assessed price and the Second Month (or M2) Brent crude oil forward contract. They trade over

400-550: A commissioner-manager form of government. The Cimarron Correctional Facility is located three miles southwest of Cushing. Due to reductions by the Oklahoma Department of Corrections in the number of inmates put in private prisons because of budgetary issues, owner CoreCivic announced closure of the facility in July 2020. The Cushing school district has five schools that include a preschool , two elementary schools,

480-585: A day. This enhanced Cushing's status as "Pipeline Crossroads of the World." The maze of pipelines and tanks that had been built led to the NYMEX choosing Cushing as the official delivery point for its light sweet crude futures contract in 1983. In May 2023, Cushing was selected as the site for a $ 5.56 billion crude oil refinery for processing 250,000 barrels per day of light and sweet crudes into low-carbon transportation fuels. The next-generation refinery, built with

560-463: A five-day work week in volumes of 100 or 100,000 lots and the most recent CFD rolls to the next-week CFD on Thursday. The CFD market developed in 1988 in response to basis risk between the Brent futures/forward contract prices and the spot/dated Brent prices. In contrast to open forward contracts, Brent crude oil "dated" contracts – known as dated Brent contracts – specify the delivery date of crude in

640-621: A goal of zero-carbon footprint operation, should be operational in 2027. Cushing is located in Payne County at the intersection of Oklahoma State Highway 18 and Oklahoma State Highway 33 . According to the United States Census Bureau , the city has a total area of 7.6 square miles (20 km ), of which 7.6 square miles (20 km ) is land and 0.13% is water. As of the census of 2000, there were 8,371 people, 3,071 households, and 2,002 families residing in

720-586: A middle school, and a high school. The district serves approximately 1,800 students. Cushing is at the eastern intersection of State Highway 33 (east-west) and State Highway 18 (north-south). Cushing is served by the Cushing Municipal Airport (KCUH, or FAA Identifier CUH), featuring a paved 5201' x 100' runway. Commercial air transportation is available out of the Stillwater Regional Airport about 20 miles to

800-680: A notice of at least 15 days of intention to deliver. More recently, the notice period has expanded to 10 days to one month ahead. This shifted the front month of the Brent forward contract. For example, on May 4, the Front Month forward contract (also known as M1) is the July contract, the Second Month (M2) contract is the August contract, and the Third Month (M3) contract is the September contract. Producers and refiners buy and sell oil on

880-472: A payroll of $ 39.3 million, resulting in a total economic impact of $ 18.2 billion over the following decade. Cushing was home to minor league baseball . The Cushing Oilers and Cushing Refiners played as members of the Class D Southwestern League (1921), the Class D Oklahoma State League (1923–1924) and Southwestern League (1925). Baseball Hall of Fame member Carl Hubbell made his professional debut with

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960-458: A premium to Brent before 2011, but since the shale oil boom in the 2010s it has been traded at a discount against Brent crude oil. Both the volatility of the WTI/Brent premium/discount, as well as its reversal from premium to discount in 2011, are studied and monitored by market participants as indicators for the functioning of WTI and Brent Crude as oil price benchmarks. In February 2011, WTI

1040-497: A quality premium over Brent crude oil grades, while Forties have a price discount for high sulphur content. Brent prices usually reflect the cheapest or the most competitive physical crude oil in the above basket, which means that Brent prices usually reflect prices for Forties crude oil. These quality changes to Brent Crude oil directly affect the premium or discount between what refiners would pay for WTI and Brent crude oil. Brent crude Brent Crude may refer to any or all of

1120-446: A reference price originally set by BNOC and eventually calculated as a 30-day price average of spot prices before an oil transaction. Forward market prices tended to be lower than these reference prices a lot of the times, and integrated oil producers could profitably lower their tax obligations by selling oil on the forward market from their production operations, and buying back oil from unrelated parties for their refining operations on

1200-589: A refining center, when Consumers Oil Company opened a refinery in 1913. Production centered on the new town of Drumright , and Cushing became a refining center. Eventually, 23 oil companies and five oil-field supply houses located in the town, and more than 50 refineries once operated in the Cushing area. Pipelines and storage facilities have since made it "the pipeline crossroads of the world". The oil boom did not last long. Production peaked in 1915 with 8.3 million barrels of oil, but went down by 50% in 1916. During

1280-473: A relatively higher price for those contracts to get the same underlying spot price exposure as their previous expiring contract. These roll costs could be viewed as compensation, purchased virtual storage, or an indirect subsidy for storage owners to provide the service of storing crude on behalf of financial investors. In the WTI context, storage owners would include most participants in the physical WTI market. Beyond

1360-406: A substantial contributor to the WTI premium over Brent crude. Premiums/discounts between WTI and Brent crude also reflects declining crude oil production priced under Brent crude prices. As crude production declines from depletion in Brent crude associated North Sea oilfields ( Brent , Forties , Oseberg , Ekofisk , and Troll ; also referred to as BFOET), a higher proportion of that oil production

1440-615: A three-tiered ramp with 5 pool slides. Main Street is the locale for the Downtown Cushing Centennial Park, which has a stage and picnic tables with umbrellas. Buffalo Rock Golf and Venue Golf Course, originally the Cushing Country Club dating from 1921, is an 18-hole course open to the public. Cushing Lake, 6 miles west of the city, offers a boat ramp, dock, and picnic area. Cushing has

1520-674: A typical price difference per barrel of between ±3 USD/bbl compared to WTI and OPEC Basket; however, since the autumn of 2010 Brent has been priced much higher than WTI, reaching a difference of more than $ 11 a barrel by the end of February 2011 (WTI: US$ 104/bbl, LCO: US$ 116/bbl). In February 2011 the divergence reached $ 16 during a supply glut, record stockpiles, at Cushing, Oklahoma before peaking at above $ 23 in August 2012. It has since (September 2012) decreased significantly to around $ 18 after refinery maintenance settled down and supply issues eased slightly. Many reasons have been given for this divergence ranging from regional demand variations, to

1600-523: A variety of spot prices split into various categories set by the price controls. After the price decontrol, WTI graded crude oil traded under spot prices centered around spot prices at Cushing, Oklahoma, Midland, Texas, and Houston, Texas (specifically at the Magellan East Houston "MEH" Terminal). Oil price collapses during 1985-1986 significantly reduced local oil production around Cushing, and linked Gulf Coast imported crude oil supplies into

1680-483: Is B. It was originally traded on the open outcry International Petroleum Exchange in London starting in 1988, but since 2005 has been traded on the electronic Intercontinental Exchange , known as ICE. One contract equals 1,000 barrels (159 m ) and quoted in U.S. dollars . Up to 96 contracts, for 96 consecutive months, in the Brent crude oil futures contract series are available for trading. For example, before

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1760-535: Is a light crude oil (LCO), though not as light as West Texas Intermediate (WTI). It contains approximately 0.37% of sulphur , classifying it as sweet crude , yet not as sweet as WTI. Brent is suitable for production of petrol and middle distillates . It is typically refined in Northwest Europe. Brent Crude has a density of approximately 835 kg/m , being equivalent to a specific gravity of 0.835 or an API gravity of 38.06. The Brent Index

1840-457: Is a "vital transshipment point with many intersecting pipelines, storage facilities and easy access to refiners and suppliers." Crude oil flows "inbound to Cushing from all directions and outbound through dozens of pipelines." Crude oil tank farms around Cushing have over 90 million barrels of storage capacity. The new refinery announced in May 2023 is expected to create 423 direct jobs and produce

1920-464: Is an extreme case of contango . Assess WTI prices were affected, and the WTI spot price dropped to -$ 36.98 on April 20. At the same time, Mars crude oil produced in the US Gulf Coast (USGC) settled at -$ 26.63, and Middle East exporters who uses ASCI (of which Mars is a component) as the selling price benchmark had to settle for negative prices that day. Historically, WTI has generally traded at

2000-494: Is calculated as an average of the following elements: Cushing, Oklahoma Cushing ( Meskwaki : Koshineki , Iowa-Oto : Amína P^óp^oye Chína , meaning: "Soft-seat town" ) is a city in Payne County , Oklahoma , United States. The population was 7,826 at the time of the 2010 census, a decline of 6.5% since 8,371 in 2000 . Cushing was established after the Land Run of 1891 by William "Billy Rae" Little. It

2080-556: Is consumed by local European refiners, and both a lesser proportion and a lesser absolute amount of that oil production can be exported to the US. During periods when WTI trades at a premium to Brent crude, declining Brent crude production pushes up that premium as traders cannot source supplies to sell into the US for a profit. As well, participants in the Brent crude market compensates for declining North Sea production by associating additional oilfields and different quality crude production into

2160-752: Is in Payne County, Oklahoma , United States . Starting in 2003, an influx of traders from outside of the oil industry begun to participate in oil futures and other commodities futures markets. These market participants, which includes hedge funds, pension funds, insurance companies, and retail investors, were motivated by the increasing acceptance of oil futures contracts and related derivatives as financial assets. Demand from these investors and general financial innovation created inexpensive access to financial instruments related to oil futures contracts, such as options, index funds, and exchange-traded funds. As part of wave of investor interest, WTI crude oil futures prices (as well as Brent Crude oil prices) are included in both

2240-742: Is not from any specific oil fields. Rather, WTI is described (for example by the Alberta Government) as "light sweet oil traded and delivered at Cushing, Oklahoma" (with WTI Midland and WTI Houston crude oil defined similarly for Midland, Texas, and Houston, Texas respectively). Historically, local trade between oilfield production and refineries around Midland, Texas, and Cushing, Oklahoma , could be said to define WTI oil, but as local production declined, pipelines into those areas began to deliver crude oil of other grades, produced and blended elsewhere, which were also accepted as WTI. The WTI futures contract formalized this relationship by specifying that

2320-1125: Is one of the two main benchmark prices for purchases of oil worldwide, the other being West Texas Intermediate (WTI) . Popular media references to "Brent crude" usually refers to the ICE Brent crude oil futures price. The ICE Brent crude oil futures price is part of the Brent Complex , a physical and financial market for crude oil based around the North Sea of Northwest Europe, which could include numerous elements that can be referred to as Brent crude: The Brent Complex fosters commercial transactions of Brent crude oil, gathers price data those transactions (in forwards, CFDs, and Dated Brent), establishes reference prices for other global oil trade transactions (in Dated Brent assessed prices, Dated BFOET assessed prices, forward traded prices, and futures traded prices), and transfers risks of those transactions (through hedging in forward and futures markets). The ICE Futures Europe symbol for Brent crude oil futures

2400-530: Is the cash settlement price for the Intercontinental Exchange (ICE) Brent Future based on ICE Futures Brent index at expiry. The index represents the average price of trading in the 25-day Brent Blend, Forties, Oseberg, Ekofisk (BFOE) market in the relevant delivery month as reported and confirmed by the industry media. Only published cargo size (600,000 barrels (95,000 m )) trades and assessments are taken into consideration. The index

2480-510: Is typically reported as WTI, while eligible spot transactions at Midland, Texas, and Houston, Texas (at the MEH Terminal) are reported as WTI Midland, and WTI Houston respectively. The development of WTI spot and futures markets led crude oil producers around the world to use assessed WTI prices as a benchmark in oil pricing . For example, in 2008, Saudi Arabia, Kuwait, Iraq, Colombia, and Ecuador based their crude oil selling prices on either

West Texas Intermediate - Misplaced Pages Continue

2560-581: The Bloomberg Commodity Index and the S&;P GSCI commodity index, which are benchmark indices widely followed in financial markets by traders and institutional investors . Its weighting in these commodity indices give LME Nickel prices non-trivial influence on returns on a wide range of investment funds and portfolios . For financial investors without oil storage, purchasing the shortest maturity futures contract and then rolling to

2640-611: The Brent oilfield in the North Sea in 1976. As production from the Brent oilfield declined to zero in 2021, crude oil blends from other oil fields have been added to the trade classification. The current Brent blend consists of crude oil produced from the Forties (added 2002), Oseberg (added 2002), Ekofisk (added 2007), Troll (added 2018) oil fields (also known as the BFOET Quotation) and oil drilled from Midland, Texas in

2720-491: The Permian Basin (added 2023). The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum. This grade is described as light because of its relatively low density, and sweet because of its low sulphur content. Brent is the leading global price benchmark for Atlantic basin crude oils. It is used to set the price of two-thirds of the world's internationally traded crude oil supplies . It

2800-649: The brent goose ). But it is also a backronym or mnemonic for the formation layers of the oil field: Broom, Rannoch, Etive, Ness and Tarbert. Petroleum production from Europe, Africa, and the Middle East flowing West tends to be priced relative to this oil, i.e. it forms a benchmark. The other well-known classifications (also called references or benchmarks ) are the OPEC Reference Basket , Dubai Crude , Oman Crude , Shanghai Crude, Urals oil and West Texas Intermediate (WTI). Brent blend

2880-502: The 1923 Cushing Refiners. The foundations of Cushing Municipal Park were established in 1935 with Cushing Memorial Park, constructed by the WPA . Over time, more and more features have been added, including a Duck Pond, a picnic pavilion, gazebos, various playground areas, skate park, disc golf course, sand volleyball court, and baseball diamond. The Cushing Aquatic Center includes a splashpad, wading pool, full sized pool with swim lanes, and

2960-460: The 1970s and 1980s refining operations continued in Cushing until the last two refineries, Kerr-McGee and Hudson, closed. Rail service ended in 1982. As the oil fields started to run dry, starting in the 1940s, production and refining became less important. The town retained a great asset in the Shell pipeline terminal, with 39 storage tanks and pipelines that could move as much as 1.5 million barrels

3040-545: The 2010 Census). However, it is the site of the Cushing Oil Field , which was discovered in 1912, and dominated U.S. oil production for several years. The area became a "vital transhipment point with many intersecting pipelines, storage facilities, and easy access to refiners and suppliers," infrastructure which remained after the Cushing field had declined in importance. Crude oil flows "inbound to Cushing from all directions and outbound through dozens of pipelines". It

3120-629: The Cushing region and the WTI market. The growth of the WTI spot market came in tandem with the growth of the WTI futures market. The volatility of WTI spot prices lead to the development of WTI futures contracts, while the adoption of the WTI futures contracts as hedging tools by producers and refiners worldwide lead to the worldwide adoption of assessed physical WTI spot prices as benchmark prices for crude. Price Reporting Agencies (PRAs), such as Platts and Argus Media , compiled assessment prices of WTI based on prices of spot transactions starting in 1981. Eligible spot transaction prices at Cushing, Oklahoma,

3200-790: The Gulf and East Coast, where it received Brent prices. Brent continued to trade $ 10–20 higher than WTI for two years, until June 2013. To the extent that price difference between WTI and Brent crude entice traders to ship WTI to North Sea refineries or ship Brent to US Gulf Cost refineries, the premium/discount between WTI and Brent crude must reflect oil tanker freight costs. Oil tanker freight cost rates could be highly volatile, due to circular dependence on fuel oil prices and ultimately crude prices, to demand for oil tankers to serve non-USGC non-North-Sea trade routes (especially to China), and to demand for using oil tankers as floating storage for crude oil. From 2000 to 2009, oil tanker freight rates represented

3280-583: The NYMEX WTI futures contract characterization is a requirement for WTI crude oil delivery to the contract. WTI crude oil will typically satisfy the WTI futures contract requirements and be close to the Platts and Argus assessed values at the time. The US governmental decontrol of oil prices on January 28, 1981, marked the beginning of the physical WTI Crude Oil spot market. Under the previous US Emergency Petroleum Allocation Act of 1973, WTI crude oil traded under

West Texas Intermediate - Misplaced Pages Continue

3360-712: The Platts WTI Mnth 1 index or the Platts WTI Mnth 2 index (the assessed prices of transactions with delivery in the next deliverable month or the second deliverable month). Subsequently, Saudi Arabia, Kuwait, and Iraq started using the Argus Sour Crude Index (ASCI) as their price index in 2009, but the ASCI index itself is priced in relation to WTI futures with a differential, which imply those countries still effectively benchmark their crude oil selling prices to WTI. The volatility of crude oil prices after

3440-580: The US oil price decontrol led to the development of the NYMEX WTI Light Sweet Crude Oil futures contract in 1983. The NYMEX Crude Oil contract trades under the symbol CL on the New York Mercantile Exchange, now part of Chicago Mercantile Exchange . The contract is for 1,000 US barrels, or 42,000 US gallons, of WTI crude oil, the minimum tick size of the contract is $ 0.01 per barrel ($ 10 for contract), and

3520-583: The WTI contracts. Brent futures contracts could theoretically access the storage capacity of all the shore tanks in North West Europe and of available shipping storage, while CME WTI contracts are restricted to storage and pipeline capacity at Cushing only. Brent futures contracts are traded in relation with Dated Brent and other contracts in the Brent Complex, allowing other contracts in the system to absorb demand shocks. Up to April 20, most of

3600-565: The World." The area that became Cushing was part of the Sac and Fox Reservation . With the Land Run of 1891 , a former government trader for the tribe, Billy Rae Little, built a house, established his claim, and laid out town lots. The town got a post office on November 10, 1891, and was named for Marshall Cushing, private secretary to U.S. Postmaster General John Wanamaker. In 1902, the Eastern Oklahoma Railway line to Cushing

3680-599: The assessed Dated Brent price, and created incentives for speculative squeezes. Platts and other PRAs got around the problem by quoting both a dated Brent assessed on outright spot market transactions, and a "North Sea Date Brent Strip" assessed using a Front Month Brent forward price curve created out of adding the Brent Front Month contract price and relevant weekly Brent contracts-for-difference (CFD) prices. These dated Brent prices became less vulnerable to speculative squeezes, since market actors who try to corner

3760-406: The average family size was 2.99. In the city, the population was spread out, with 22.9% under the age of 18, 10.0% from 18 to 24, 29.5% from 25 to 44, 20.0% from 45 to 64, and 17.6% who were 65 years of age or older. The median age was 37 years. For every 100 females, there were 111.4 males. For every 100 females age 18 and over, there were 115.6 males. The median income for a household in the city

3840-401: The city. The population density was 1,096.1 inhabitants per square mile (423.2/km ). There were 3,636 housing units at an average density of 476.1 per square mile (183.8/km ). The racial makeup of the city was 79.66% White , 7.02% African American , 7.97% Native American , 0.13% Asian , 0.90% from other races , and 4.32% from two or more races. Hispanic or Latino of any race were 2.70% of

3920-694: The coast by railroad, which is much more expensive than pipeline. On April 20, 2020, the CME WTI futures contract for May 2020 settled at −US$ 37.63 a barrel due to oil demand shocks from the COVID-19 pandemic , and to dwindling storage capacity at the futures contract delivery point at Cushing, Oklahoma. Brent settled for US$ 26.21 at the same time, for a difference of $ 63.84. While the oil demand shock and limited storage capacity affects both WTI and Brent futures contracts, Brent contracts have greater access to storage, and greater buffers to absorb demand shocks than

4000-447: The components of the Brent Complex , a physically and financially traded oil market based around the North Sea of Northwest Europe; colloquially, Brent Crude usually refers to the price of the ICE (Intercontinental Exchange) Brent Crude Oil futures contract or the contract itself. The original Brent Crude referred to a trading classification of sweet light crude oil first extracted from

4080-514: The contract price is quoted in US dollars. Monthly contracts are available for the current year, the following 10 calendar years, and 2 additional months. For example, from the perspective of any day in June before the last trade date for the June 2020 contracts, contracts for June 2020, July 2020, August 2020, ... December 2030, January 2031, and February 2031 are available for trading. The maximum number of contracts would be 134 contracts, which occurs at

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4160-506: The crude oil market is also associated with lower price volatility. WTI futures contracts are tied to physical deliveries into the physical spot WTI market, so WTI futures contract prices should converge to physical spot WTI market conditions and prices. But since deliveries made to settle an expiring WTI futures contract are also physical spot WTI transactions that can be included into PRA assessed prices, abnormal futures contract transactions could drive WTI spot prices and assessed prices. This

4240-402: The current month in the spot market. Spot market transactions are generally not public, so market participants usually analyzed Dated Brent prices using assessments from Price Reporting Agencies (PRAs), who collect private transactions data and aggregate them. The important PRAs for the Brent Complex are Platts , Argus , and ICIS. Platts dominates the assessed Dated Brent price, Argus publishes

4320-400: The definition of Brent crude, which affects the quality differential between Brent and WTI crude oils. Forties and Oseberg crude oil was added in 2002, Ekofisk crude oil was added in 2007, and Troll crude oil was added in 2018 to Brent crude oil pricing basket. Moreover, the different grades in the "Brent basket" are priced different. For example, Ekofisk, Oseberg, and Troll crude oil grades have

4400-522: The deliverable asset for the contract could be a blend of crude oil, as long as it was of acceptable lightness and sweetness. Crude oil lightness is characterized by oil gravity , and crude oil sweetness by sulfur content. Measurements of lightness and sweetness of WTI changes depending on the particular light and sweet oil traded at Cushing at the time of the measurement, and even the particular measurement methodology. The Platts and Argus API and sulfur measurements are descriptions of WTI as assessed, while

4480-809: The delivery date. From 1983 to 1985, these contracts were for 500,000 barrels of Brent Blend crude, and were increased to 600,000 barrels after 1985. Deals were made bilaterally between two parties by telephone and confirmed by telex . Payment for deals were made 30 days after oil delivery. Since deals were bilateral and not centrally cleared like futures transactions, parties to the deal sought financial guarantees such as letters of credit to minimize counterparty credit risk . Contracts for one and two months forward were available in 1983, contracts for three months forward were available in 1984, contracts for four months forward were available in 1985, and contracts for at least four months are available for trading today. Sellers of Brent forward contracts initially had to give buyers

4560-440: The delivery month. Although price discovery for the Brent Complex is driven in the Brent forward market, many hedgers and traders prefer to use futures contracts like the ICE Brent futures contract to avoid the risk of large physical deliveries. If the market participant is using Brent futures to hedge physical oil transactions based on Dated Brent, they will still face basis risk between Dated Brent and EFP prices. Hedgers could use

4640-545: The demand shock from the COVID-19 pandemic has been absorbed by Dated Brent contracts and Dated Brent quality differentials, which spared pricing pressure on Brent futures contracts. While Brent is more insulated to negative pricing by these factors than WTI, negative prices are still possible should oil demand and storage capacity fall further. Brent crude oil monthly forward contracts started trading in 1983 as "open" contracts, or contracts that specify delivery month but not

4720-541: The depletion of the North Sea oil fields. The US Energy Information Administration attributes the price spread between WTI and Brent to an oversupply of crude oil in the interior of North America (WTI price is set at Cushing, Oklahoma ) caused by rapidly increasing oil production from unconventional reservoirs such as Canadian oil sands and tight oil formations such as the Bakken Formation , Niobrara Formation , and Eagle Ford Formation . Oil production in

4800-491: The end of trading for a particular day. Trading in these windows are dominated by group of major market participants, as listed in the table below. Originally Brent Crude was produced from the Brent Oilfield . The name "Brent" comes from the naming policy of Shell UK Exploration and Production, operating on behalf of ExxonMobil and Royal Dutch Shell , which originally named all of its fields after birds (in this case

4880-457: The expiry of a December contract when contracts for a new calendar year and two months are made available for trading. Cushing, Oklahoma is a major trading hub for crude oil and has been the delivery point for crude contracts and therefore the price settlement point for West Texas Intermediate on the New York Mercantile Exchange for over three decades. The town of Cushing, Oklahoma is a small, remote place with only 7,826 inhabitants (according to

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4960-452: The first time ever, the reduction in trading shut down the Trade at Settlement (TAS) mechanism of the May 2020 WTI contract 30 minutes before the end of trading due to a lack of buyers. The TAS shutdown signaled to market participants that all remaining open May 2020 WTI contracts that have to be sold, either outright or for the purposes of rolling to the June 2020 contract, to the open market in

5040-471: The interior of North America has exceeded the capacity of pipelines to carry it to markets on the Gulf Coast and east coast of North America; as a result, the oil price on the US and Canadian east coast and parts of the US Gulf Coast since 2011 has been set by the price of Brent Crude, while markets in the interior still follow the WTI price. Much US and Canadian crude oil from the interior is now shipped to

5120-428: The last trading date for May 2020, 96 contracts, from contracts for May 2020, June 2020, July 2020 ... Mar 2028, April 2028, and May 2028 are available for trading. ICE Clear Europe acts as the central counterparty for Brent crude oil and related contracts. Brent contracts are deliverable contracts based on 'Exchange of Futures for Physicals' (EFP) delivery with an option to cash settle against the ICE Brent Index price for

5200-535: The last trading day of the futures contract. In addition to ICE, two types of Brent crude financial futures are also traded on the NYMEX (now part of the Chicago Mercantile Exchange (CME) . They are ultimately priced in relation to the ICE Brent crude oil futures and the ICE Brent Index. Brent Crude Oil Penultimate Financial Futures , also known as Brent Crude Oil Futures , are traded using

5280-500: The market for wholesale trade, hedging, and tax purposes. Producers without integrated refinery operations, and vice versa for refiners without oil production, had to sell oil and could hedge oil price risk with forward contracts. Integrated oil producers (those with refinery operations) had the same motives, but had an extra incentive to lower taxes. Integrated oil producers faced taxes when transferring oil internally from production to refining operations. These taxes are calculated based on

5360-474: The need by financial investors in oil, oil storage is also valuable because it provides insurance against supply disruptions or unexpected increases in demand. Refiners who wish to avoid carrying real physical oil inventories can purchase futures contracts as virtual storage as an alternative. Oil producers wishing to maintain real physical oil inventories similarly could lower the cost of those inventories through selling futures contracts. Index fund participation in

5440-425: The next contract priory to expiry offered the closest approximation to investing in physical oil prices. However, financial markets are much larger than oil markets, and investor flows began to dominate oil producers' hedging needs and moved the oil futures market into contango , where futures prices are greater than spot prices. Contango imposes a roll cost on investors who must roll futures contracts, as they must pay

5520-490: The next twenty minutes. The speed at which the contracts had to be sold, and the closeness of that time to contract expiry meant that large physical oil traders, who could have transported and stored oil elsewhere given a low enough price, could not buy contracts due to operational, risk management, and position limit constraints. Any remaining traders who were willing to buy contracts gained enormous market power and pushed prices downwards into negative territory . This situation

5600-531: The oil, and long chains of speculators formed between producers and refiners for every cargo of oil traded. Integrated oil producers also blurred the lines between commercial and speculative activity, as they could re-direct physical oil cargoes, and choose which forward contracts to deliver and which contracts to pass on to other speculators or producers. Front Month Brent forward contracts prices came to be used as reference prices for spot transactions, but became vulnerable to speculative squeezes. The development of

5680-409: The population. There were 3,071 households, out of which 29.9% had children under the age of 18 living with them, 48.7% were married couples living together, 12.4% had a female householder with no husband present, and 34.8% were non-families. 31.3% of all households were made up of individuals, and 16.1% had someone living alone who was 65 years of age or older. The average household size was 2.39 and

5760-444: The same market. This practice became less prevalent with the introduction of tougher regulations in 1987. Speculators became bilateral intermediaries between producers and refiners, and speculative deals came to dominate the forward market. Since there was no central clearing of those forward contracts, speculators who bought Brent forwards at the time and who do not want to take delivery of physical oil must find other parties to take

5840-553: The spot market will find that other market participants can sell on the front month forward market or on prices referenced to a front month forward market price, and market actors who try to monopolize the front month forward market will find that they would lose what they earned in the forward market in the spot market, as price effect they created in the front month contract will pass on to the dated Brent prices. Platt's compile their assessment prices during price assessment 'windows', or specific times of market trading, usually close to

5920-569: The symbol BB, and are cash settled based on the ICE Brent Crude Oil Futures 1st nearby contract settlement price on the penultimate trading day for the delivery month. Brent Last Day Financial Futures , also known as Brent Crude Oil Financial Futures , are traded using the symbol BZ, and are cash settled based on the ICE Brent Crude Oil Index price as published one day after the final trading day for

6000-670: The two prices back to parity. Oil prices at coastal areas of the United States were closer to Brent than to WTI. In June 2012, the Seaway Pipeline , which had been transporting oil from the Gulf Coast to Cushing, reversed its flow direction, to transport WTI-priced crude to the Gulf Coast, where it received Brent prices. The price difference persisted, however, and was large enough that some oil producers in North Dakota put their oil on tanker cars, and shipped it by rail to

6080-426: Was $ 26,483, and the median income for a family was $ 32,284. Males had a median income of $ 26,710 versus $ 17,711 for females. The per capita income for the city was $ 12,620. About 15.1% of families and 16.4% of the population were below the poverty line , including 21.0% of those under age 18 and 10.1% of those age 65 or over. Cushing is a major crude oil hub within the United States and worldwide oil industry . It

6160-492: Was built. The Missouri, Kansas and Texas Railway added service on its own line built in 1903. Wildcatter Thomas B. Slick started an oil boom on March 17, 1912, when he brought in a gusher east of Cushing. Other wells were soon drilled nearby, and the oil field became known as the Cushing-Drumright Oil Field . The city became a center for exploration of and production from nearby oil fields and also

6240-508: Was named for Marshall Cushing, private secretary to U.S. Postmaster General John Wanamaker . A 1912 oil boom led to the city's development as a refining center, with over 50 refineries operating in Cushing over its history. Today, Cushing is a major trading hub for crude oil and a price settlement point for West Texas Intermediate on the New York Mercantile Exchange and is known as the "Pipeline Crossroads of

6320-443: Was the case on April 20, 2020, when WTI futures contract trading drove both assessed WTI and ASCI prices to negative territories. On April 20, 2020, WTI's May contract closed at -$ 37.63/barrel while the June contract closed at positive $ 20.43/barrel. Prices mainly dropped due to the COVID-19 pandemic , which reduced demand, with storage issues and the expiration of the May contract on the following day resulting in reduced trading. For

6400-491: Was trading around $ 85/barrel while Brent was at $ 103/barrel. The reason most cited for this difference was that Cushing had reached capacity due to a surplus of oil in the interior of North America. At the same time, Brent moved up in reaction to civil unrest in Egypt and across the Middle East. Since WTI-priced stockpiles at Cushing could not easily be transported to the Gulf Coast, WTI crude was unable to be arbitraged in bringing

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