Brent, the European benchmark, is on the cusp of overtaking West Texas Intermediate (WTI) in world oil trading for the first time since the creation of the futures contract, as the American benchmark has ceased to reflect the dynamics of the global market.
Over the past two years, the price of Brent has followed the vagaries of supply and demand, and responded to a series of geopolitical events that have made the barrel dearer.
In the United States, the oil market is subject to its own rules, and is distorted by an export ban and constraints to move oil from the country's crude hub in Cushing, Oklahoma. This has caused the price of Brent and WTI to diverge, with traders favouring the former as an accurate gauge of global fundamentals.
"WTI [has] continued to dislocate and started reflecting local conditions of the US Midwest rather than global fundamentals," said Amrita Sen, the chief oil analyst at Energy Aspects. "As a result, Brent gained in popularity for reflecting global supply-demand balances. Hedgers and investors both moved away from WTI."
So far this year, trading in Brent increased 14 per cent to 567,000 contracts - each at 1,000 barrels per day, while WTI trading has declined 17 per cent to 575,000 contracts, according to research by Bloomberg.
Commodity indexes are reacting to the shift. Brent's weighting in the Standard & Poor's GSCI Commodity Index will be increased by almost 4 per cent, while WTI's share will be cut by more than 6 per cent. The Dow Jones-UBS Commodity Index will also be re-weighted.
Brent futures gained nearly 30 per cent over the past two years, buoyed by supply interruptions arising from the civil war in Libya and the latest round of sanctions imposed on Iran.
By comparison, WTI futures only rose by about 10 per cent in that period. Prices are kept low by a supply glut at Cushing, caused by insufficient pipeline capacity to transport crude from the hub.
The Seaway pipeline will increase the capacity to flush crude to refineries in Texas and Louisiana by a factor of three from next month. But the anticipated surge in US oil production by conventional means in the so-called shale revolution, coupled with an export ban dating from the Arab oil embargo in the 1970s, is likely to keep Cushing amply supplied.
This does not tally with the global demand-supply picture. In spite of weak European demand, and slowing growth in China and neighbouring countries, Asian demand is pushing prices up.
"Brent reflects global conditions and within that Asian demand is a key component," said Ms Sen.
Asian countries are ready receivers of Arabian Gulf crude in particular, and Asia's growing thirst for oil has led to a gradual realignment of the global crude trade. China, South Korea and Japan all count as top importers of Abu Dhabi oil, and Arabian Gulf crude in general.
WTI still leads Brent by some measures, and open interest - contracts that have not been closed - remains 30 per cent higher for the US futures. But the trend has been set, and analysts expect this to continue for the foreseeable future.
"It may change if we start to see the US exporting, but I don't expect that to happen in the near term," said Bill Farren-Price,the head of the consultancy Petroleum Policy Intelligence.
