A decision last week by the U.S. Energy Information Agency may have cost the Oklahoma oil patch a bit of international recognition.
The EIA chose to adopt Brent crude — priced in London — as the standard benchmark for oil prices, instead of West Texas Intermediate, which is priced in Cushing and has been the historical benchmark for domestic oil.
Practically, the change is expected to have little effect on Oklahoma producers.
WTI has traded $15 to $25 a barrel below Brent prices for much of the past five years as crude oil production in Oklahoma, Texas, North Dakota and other central-U.S. oil fields has outpaced pipeline capacity.
Because of the flood of new oil, millions of barrels of storage capacity has been built throughout Cushing to hold the crude as it waits in line before heading to Gulf Coast refineries.
The government said in its Annual Energy Outlook 2013 that it made the change “to better reflect the price refineries pay for imported light, sweet crude oil” and to take “into account the divergence of WTI prices from those of globally traded benchmark crudes such as Brent.”
The difference between crude oil prices has been especially important to Oklahoma City-based Continental Resources Inc., which is the largest producer in the Bakken field in North Dakota and Montana.
The new benchmark is a recognition of how the price differences have affected domestic producers, said Jeff Hume, Continental's vice chairman of strategic growth initiatives.
“Right now it's probably a logical thing to do because WTI is so disadvantaged from a lack of pipeline infrastructure,” he said.
While the price difference has been significant for several years, Hume said he expects relief soon.