Oil price differences 'narrowing'

18 August 2010

Current discounts on New York crude futures for delivery in 2012 could fall by the wayside as a result of new restrictions following the Deepwater Horizon spill.

Contracts for 2012 delivery have been cheaper on the New York Mercantile Exchange than on the Intercontinental Exchange in London, Bloomberg reports, but this price difference could disappear as a result of production limits following the spill.

Production in the US could suffer if the current offshore drilling ban is extended, and prices could follow more of an upward trend as a result.

Derivatives such as heating oil could also see changes, given that they broadly follow patterns set by crude.

West Texas Intermediate (WTI) crude typically trades at a higher price than Brent on the London exchange, but excess supplies over recent months have seen prices fall below that offered in London.

WTI has a lower sulphur content than Brent crude, allowing higher yields of derivatives such as heating oil.

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