WTI has a sulfur content between 0.24% and 0.34%, whereas Brent has a sulfur content between 0.35% to 0.40%. The lower the sulfur content of an oil, the easier it is to refine, making it more desirable to prtrend is it a scam or cheating review producers. Brent crude and WTI crude are the most popular benchmarks, but their prices are often contrasted. The difference in price between Brent and WTI is called the Brent-WTI spread.
What Is the Difference Between Brent and WTI?
Should the value of a certain crude marker skyrocket, the owner of a call option would have the right— though not the obligation—to buy a specific number of barrels at a pre-determined price. This Middle Eastern crude is a useful reference for oil of a slightly lower grade than WTI or Brent. A “basket” product consisting of crude from Dubai, Oman, and Upper Zakum, it’s somewhat heavier and has higher sulfur content, putting it in the “sour” category. The Dubai benchmark is the main reference for Persian Gulf oil delivered to the Asian market. West Texas Intermediate (WTI) is a grade of crude oil and one of the main three benchmarks in oil pricing, along with Brent and Dubai Crude.
While the two crude oil varieties can trade at similar price points, each one has its own unique supply and demand market, and therefore its price reflects distinct market fundamentals. The NYMEX (New York Mercantile Exchange) division of the CME (Chicago Mercantile Exchange) lists futures contracts of WTI crude oil. Besides being one of the most actively traded commodities, the price of crude oil is extremely sensitive to geopolitical and weather events. It is of course possible to invest in WTI crude oil from just about anywhere around the world. In fact, the majority of the financial derived products available through online European and international brokers offer contracts based on both Brent and WTI crude oil. You therefore have the choice as to which type of crude oil you wish to speculate on.
West Texas Intermediate (WTI) is a grade or mix of crude oil; the term is also used to refer to the spot price, the futures price, or assessed price for that oil. In colloquial usage, WTI usually refers to the WTI Crude Oil futures contract traded on the New York Mercantile Exchange (NYMEX). Oil produced from any location can be considered WTI if the oil meets the required qualifications.[2] Spot and futures prices of WTI are used as a benchmark in oil pricing.
The types of crude oil come from regions as diverse as Alaska North Lope, Arab Light or Zueitina in Libya. For the purposes of trading on futures exchanges in London or New York, however, reference oils are used. These are standardised products used to determine the prices for all other types. The reference oil traded most frequently and of major significance for the USA is West Texas Intermediate (WTI), while the most important in Asia is Dubai Fateh.
Global adoption of WTI assessed prices as oil benchmark prices
“Spot price” is another way of referring to the market price for a commodity, so the Cushing spot price is the price at which you can buy or sell a barrel of oil that delivers in Cushing. First, an agreement with Iran was struck, allowing the country to export more oil, which should have increased the amount of Iranian crude flowing into the market on a daily basis. Since Brent is the pricing benchmark for Iranian crude, that development depressed the price of Brent at the time. The nominal price of crude oil is just one factor involved in understanding the crude oil market. WTI is one of the most referenced benchmarks used in oil news reports on oil prices, along with the Brent price – which comes from the North Sea.
There are three major types of crude oil throughout the world that are used as oil reference prices according to their production zones. Therefore, for European oil, Brent from the North Sea acts as the reference, whereas for the OPEC countries, it is the Dubai crude which is referred to for the price determination. Because of these factors, buyers of crude oil—along with speculators—need an easy way to value the commodity based on its quality and location. When refiners purchase a Brent contract, they have a strong idea of how good the oil will be and where it will come from.
The fact that supplies are land-locked is one of the drawbacks to West Texas crude as it’s relatively expensive to ship to certain improvise adapt overcome quotes quotations & sayings 2021 parts of the globe. The product itself is very light and very sweet, making it ideal for gasoline refining, in particular. WTI continues to be the main benchmark for oil consumed in the United States.
About WTI Light Crude Oil
- For instance, it’s easier for refiners to make gasoline and diesel fuel out of low-sulfur or “sweet” crude than oil with high-sulfur concentrations.
- The same year, it exported about 10.15 million barrels of petroleum to 173 countries and three U.S. territories.
- There are different types of crude oil—the thick, unprocessed liquid that drillers extract below the earth—and some are more desirable than others.
- WTI only contains 0.24% sulfur and has an API gravity of approximately 39.6.
Then, in late 2011, the Iranian government threatened to close the Straits of Hormuz, through which approximately 20% of the world’s oil flows. Once again, the spread widened, as Brent soared to a $25 premium per barrel higher than WTI. The spread widened during 2011, with Brent trading at a premium compared to WTI. Around the time that the Arab Spring (an uprising across much of the Arabic region) began in Egypt in February of 2011, the spread widened. If you look at the disconnect between the two benchmarks now, and it has narrowed to about $3 – the market has levelled out.
A surge of WTI production has led many traders to consider it an important pricing benchmark vs. Brent, if not even close to the total production of the latter. The top five source countries for petroleum products imported into the U.S. are Canada, Mexico, Saudi Arabia, Iraq, and Brazil. That honor goes to Brent, which is used as a benchmark globally in two-thirds of oil contracts.
The IEA predicted in its February 2021 report that demand would recover 60% of its 2020 losses over the course of the year. While demand did rise again, more Covid lockdowns in China and a supply disruption caused by Russia’s war with Ukraine led the IEA to predict slightly slowed demand and higher prices as of May 2022. WTI refers to oil extracted from wells in the U.S. and sent via pipeline to Cushing, Oklahoma.
Therefore, Brent prices moved lower by virtue of hints of more Iranian crude, and WTI strengthened because of less U.S. production and increasing exports. It is important to notice that mere anticipation of an influx of oil into the market was enough to cause price fluctuations. The percentage of sulfur in crude oil determines the amount of processing needed to refine the oil into energy products. The most heavily traded grades are Brent North Sea crude (commonly known as “Brent crude”) and West Texas Intermediate (commonly known as “WTI”). Brent is oil that is produced in the Brent oil fields and other sites in the North Sea. But all geopolitical current events in connection with oil production also influence the WTI prices.
Brent is also tied to more worldwide oil markets, meaning that more factors are influencing its price. In 2005, hurricanes led to sharp rises in oil prices, as refineries and production facilities shut down for the duration of the weather events. The oil is considered to be very light, with a low sulfur content – considerably lighter and sweeter than Brent Crude, Dubai, or Oman. It is generally noted that the barrel price of crude WTI is slightly higher than that of the Brent or Dubai barrel.
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The disconnect became very stark at one point – when the US had a domestic glut – now that there is a global glut, there is a convergence of the two benchmarks. Light Sweet Crude Oil futures and options, in particular West Texas Intermediate futures, are the most actively traded energy product in the world. At the end of 2010 the price difference between the two benchmarks widened, and then narrowed at the end of 2013. It is possible to consult the WTI historical prices on the Energy Information Administration website of the department brokerage house financial definition of brokerage house of energy.
For example whereas WTI is the principal crude oil traded on the American markets, Brent is the primary crude oil in the petroleum sector on the European markets. It should be noted that certain differences exist relating to the composition and concentration of these two major types of crude oil. The solution came in the form of crude oil futures, which are tied to a specific benchmark crude. With futures, buyers can lock in the price of a commodity several months, or even years, in advance. If the price of the reference crude rises significantly, the purchaser is better off with the futures contract. Many futures are settled in cash, although some allow for physical delivery of the commodity.