LONDON Dec 7 The U.S. government's energy
agency has adopted North Sea Brent crude as its
benchmark for oil forecasts, dropping its domestic benchmark,
saying it no longer reflects the price paid for oil by U.S.
The Energy Information Administration (EIA) said in its
annual energy outlook it was abandoning West Texas Intermediate
(WTI), traded on the New York Mercantile Exchange
, and switching to Brent on the InterContinental Exchange
The move by the U.S. Department of Energy's energy
forecaster reflects a migration of large parts of the oil market
to Brent and away from WTI over the last year.
"This change was made to better reflect the price refineries
pay for imported light, sweet crude oil and takes into account
the divergence of WTI prices from those of globally traded
benchmark crudes such as Brent," the EIA outlook said.
The agency said WTI prices had "diverged from other
benchmark crude prices because of insufficient pipeline capacity
to move crude oil to and from Cushing, Oklahoma", the location
at which WTI prices are quoted.
The EIA said the growth of U.S. and Canadian oil production
had helped overwhelm the transportation infrastructure needed to
move crude from Cushing to the U.S. Gulf of Mexico.
Brent is becoming the hedge of choice for big investors,
even for U.S. companies, and the volume of Brent futures and
options has soared, boosting liquidity at the expense of the
The landlocked nature of WTI led the world's biggest oil
exporter, Saudi Arabia, to drop the U.S. crude as the basis for
U.S. sales in favour of a basket of Gulf of Mexico crudes.
The widely followed S&P GSCI index marks this
change on Jan. 1, raising its weighting for Brent and cutting
WTI, following a migration by major oil producers and consumers.