If you has only a passing interest in oil prices, it was not hard to notice the gaping price disparity between the two most widely quoted indexes, the current month Brent crude futures versus WTI (West Texas Intermediate), In the days prior to contract expiration in December, WTI traded as much as $9 below Brent. Right now, with January expiration near, the disparity is a flat $10, with Brent at $46.20 versus $36.20 for WTI.

That, of course, makes no sense. The culprit is limited storage in Cushing, Oklahoma. As Eugen Weinberg, a commodities specialist with Commerzbank, pointed out last May:

The West Texas Intermediate oil contract, based on delivery in Cushing, Oklahoma, is good for 300,000-400,000 barrels per day. The storage capacity in Cushing is about 20.5m barrels. The trading volume on which that is based is between 500m and 600m barrels per day. If you are going to manipulate the price, you would think about doing that in Cushing.

Now it may be that the oil glut is showing up even worse in Cushing than elsewhere because above ground storage is maxed out (even ships are full), or it may also be the evil specs. But the initial reaction among traders is to treat WTI warily.

From the Financial Times: