Brent crude topping West Texas Intermediate as most-traded oil
BY GRANT SMITH Bloomberg News
Tuesday, November 27, 2012
11/27/12 at 7:00 AM
For the first year since the futures were created, Brent crude is poised to overtake West Texas Intermediate oil as the world's most-traded commodity.
Daily trading in Brent jumped 14 percent to average 567,000 contracts this year as of Nov. 20 compared with all of 2011, while WTI fell 17 percent to 575,000, according to data from the ICE Futures Europe exchange in London and New York Mercantile Exchange compiled by Bloomberg.
The number of Brent futures changing hands has exceeded those for WTI every month from April through October, the longest streak since at least 1995.
Brent, produced in the North Sea, is gaining favor among traders because of its role as the benchmark for energy prices from Saudi Arabia to Russia. Prices have climbed 29 percent in the past two years, reflecting everything from war in Libya to the embargo on Iran.
WTI, the main grade in the U.S., has risen 9 percent as the nation, which prohibits crude exports, has struggled to clear a glut of oil at Cushing, Okla., the delivery point for Nymex futures.
"Brent crude will grow in significance," said Angelos Damaskos, manager of the Junior Oils Trust in London. "The market is looking at Brent as the international leading index for traded crude. It will be a trend that will continue for a very long time."
Transactions in Brent peaked at 1.18 million lots a day on June 21. Volumes of WTI reached a record of 1.47 million on Jan. 28, 2011. Each contract is for 1,000 barrels.
The world's most-tracked commodity indexes are adjusting their weightings in response to the expanding Brent volumes, raising the likelihood that investors who use such gauges will follow suit.
Brent's allocation in the Standard & Poor's GSCI Commodity Index of 24 raw materials will be increased to 22.34 percent from 18.35 percent in 2013, while WTI's will be cut to 24.71 percent from 30.96 percent, said Michael McGlone, a vice president at S&P Dow Jones Indices.
The Dow Jones-UBS Commodity Index will similarly expand the portion allotted to Brent and reduce WTI, according to an Oct. 24 statement.
"The market has moved over with its daily volumes into the Brent contract and clearly the passive indexes going forward will re-weight as well," King said.
Original Print Headline: Brent crude set to overtake West Texas Intermediate
Workers look at StatoilHydro platform Sleipner T, which applies carbon-capture technology to oil extraction, off the coast of Norway. Brent crude, produced in the North Sea, is overtaking West Texas Intermediate oil as the world's most-traded commodity. Bloomberg file