The US Energy Information Administration (EIA), changes in the front-month futures contract for West Texas Intermediate (WTI) at the New York Mercantile Exchange (NYMEX) could affect prices of other North American grades. The NYMEX WTI price dropped to as low as minus $40.32/barrel on April 20, dragging other regional crudes such as WTI Midland, Mars, Bakken Clearbrook, and West Texas Sour (WTS) to below zero territory due to their interconnectedness.
Despite the close relation, the interconnectedness of NYMEX WTI and other North American grades is not perfect, EIA said. NYMEX WTI is affected by events that may not influence the wider market because it is geographically specific to its storage hub at Cushing, Oklahoma. For instance, Louisiana Light Sweet, a grade with similar chemical characteristics to WTI did not fall to negative territory.
NYMEX WTI is defined by 12 different physical characteristics, including sulfur content, acidity, density, and purity. Hence, it is not suitable as a price market for other crudes with different specifications. The NYMEX WTI contract is a futures contract which is time-specific and may not reflect shorter-term spot price alternatives.
