With WTI futures below international prices, are they a 'broken benchmark?' A build-up in inventories at the delivery point for Nymex crude futures has pushed prices of the oil benchmark to an unprecedented discount to a rival futures contract, calling into question Nymex oil's role as an international price-setter. West Texas Intermediate crude, the oil that the New York Mercantile Exchange uses as the underlying commodity for its crude futures, is trading at its largest discount ever to Brent crude, the European benchmark. That's a reversal of the norm: WTI usually trades at a higher price because of its superior quality. WTI futures are also cheaper than prices charged by the Organization of Petroleum Exporting Countries, whose oil tends to be lower in quality and thus typically fetches a lower price. This recent reversal in prices has prompted at least one prominent energy agency and some market analysts and investors to suggest Nymex oil is losing its influence as a global benchmark. "Volatile WTI is sending mixed and misleading price signals not only to the market but to economic forecasters, government officials and policy makers," the International Energy Agency wrote in a report released last week. "Further deterioration in the fragile WTI pricing mechanism would only serve to reinforce the view that the crude has become an irrevocably broken benchmark," added the Paris-based energy advisor to developed countries. WTI's pricing anomalies have upended the crude's value as a basis for setting physical prices, the IEA noted in its report. The weakness in WTI futures has stemmed from excessive inventories at Cushing, Okla., the delivery point for Nymex futures. WTI has traded lower than Brent before, but this time the gap is particularly wide: It hit more than $10 last month, the most since Brent and WTI began trading in the futures market. On Tuesday, front-month Brent futures closed at $41.03 a barrel on the IntercontinentalExchange, while front-month WTI ended at $34.93 on the Nymex. The artificially low WTI prices mean oil users could pay a much higher price than WTI when they trade physical oil with producers. It also means investors putting money in Nymex futures or oil exchange-traded funds linked with Nymex could see prices rally when Cushing inventories wane, as the Nymex contract rises back above levels of Brent and other global contracts. Broken benchmark WTI is a type of light, sweet crude with lower gravity and less sulfur than almost all the rest of the 100-plus varieties of oil. The world currently only produces about 300,000 barrels a day of WTI, a fraction of the total production of about 85 million barrels a day. But since Nymex picked it as the basis for futures trading in late 1983, WTI became the most important pricing benchmark in global oil markets. That's partly because of the transparency and frequency of data releases and high-volume trading on the Nymex. The U.S.' role as the world's biggest oil consumer and importer also has helped put Nymex's WTI oil contract in the lead. Producers follow Nymex prices to price their oil, normally at a discount to a front-month WTI futures contract. OPEC members, who control about one third of the world's oil production, also price their oil at a discount to WTI that sometimes widens to more than $10, as their oil tends to be heavier and contain more sulfur. But the relation has been reversed recently. The OPEC basket price, an index of 12 types of crude produced by the cartel's 12 members, stood at $41.49 dollar a barrel Monday -- more than $6 higher than the Nymex's front-month contract price. WTI futures have also been trading lower than Brent, which historically tends to be cheaper than WTI. That's because WTI is of higher quality, and the cost of shipping oil across the Atlantic is priced in if the U.S. imports Brent from Europe. The WTI-Brent price spread, typically positive between $1.50 to $2.50 a barrel, reversed to negative in December. The discount deepened to a historical trough of more than $10 on January 15.

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