The difference between the price of Brent crude oil, the standard used around the world, and West Texas Intermediate crude oil, used primarily in the United States, just hit $25 per barrel.
That is the highest spread between the two oil contracts in over a year, and it's not far away from all-time highs.
The fall in WTI crude today may seem counterintuitive given the news of violence emanating from Israel and Gaza.
Stifel Nicolaus strategist Dave Lutz says in a short note that he thinks this spread widening is reflecting "a full rotation into Brent," and that that expiry of the WTI spot contract today is weighing on WTI crude prices as well.
So, why is a barrel of Brent crude currently worth $25 more than a barrel of WTI?
The spread has widened in recent years as supply-specific issues in the United States have weighed on the price of WTI crude.
As a result, the importance of the Brent crude price has risen on the world stage, as it better reflects the state of global oil markets.
Now, the spread between the two contracts has an added driver: unrest in the Middle East, and specifically the developing conflict between Israel and Gaza.
This added effect can be seen in the chart below, especially in the past few days:
Lutz concludes with a warning: "Don't be fooled by WTI getting hit–we have risk building FAST on escalating conflict."
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