Why Brent is More Expensive

Crude oil is always a serious concern for economies all over the world because when the price of this commodity rises it leads to inflation which ultimately hurts the growth of a country. Previously all people used to concentrate on Nymex crude price but in the past one year brent crude is gaining more attention and all investors are asking why there is such a big difference between the price of brent and nymex. Given below are some of the reasons for it

  1. Nymex is of high quality grade whereas brent is of slightly lower grade when it comes to quality and in many developing and underdeveloped countries people use this rather than nymex which leads to rise in demand for brent.
  2. Due to conflict in Arab countries the supply of brent has deteriorated leading to sharp rise in price as compared to nymex.
  3. Speculation is another reason because from past 1 year there has been a consistent difference of over $15 between the price of brent and nymex which used to be between $2 to $5.
  4. Some refineries can process only high quality crude only and therefore they cannot take advantage of high price of brent, because had they been able to refine low quality crude than gap between supply and demand could have been reduced leading to convergence between the price of both.

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