West Texas Intermediate WTI: Definition and Use as a Benchmark

Brent crude is refined all over the world by the refineries that purchase the barrels of crude oil. However, since it is drilled in Northwest Europe, most of the oil is refined nearby in that region. Fears concerning the closure of the Suez Canal and a lack of available supply caused Brent crude oil to become more expensive than WTI.

1. Exactly one month ago, Brent crude oil’s spot price was at $83.74 per barrel.
2. WTI is the underlying commodity of the New York Mercantile Exchange’s (NYMEX) oil futures contract and is considered a high-quality oil that is easily refined.
3. That means that it has a low density and low sulphur content, making it easy to refine.

In 2005, hurricanes led to sharp rises in oil prices, as refineries and production facilities shut down for the duration of the weather events. Since both types of oil are used as benchmarks, different countries will use them in different manners. Asian countries tend to use a mixture https://www.topforexnews.org/news/top-5-most-distinguished-white-label-solutions-in/ of Brent and WTI benchmark prices to value their crude oil. Read on to learn more about the live crude oil price you see historically, or on active trading days. The real-time price of Brent crude oil is at $85.75 per barrel, and the price of WTI crude oil is at $81.19 per barrel.

Where is Brent crude oil refined?

Brent crude oil opened the year of 2020 amidst an uptrend that began in November 2020 from $38.84 per barrel and continued the rally to $68.72 per barrel until early March 2021. 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. As for the WTI crude oil, it is quoted in almost all economic announcements from this sector in the United States and North America. The price of WTI tends to move in line with the price of Brent crude, although different global events will cause the value of each commodity to differ.

However, the global pool of oil and the ease with which oil moves around the world levels some of these price pressures, and no one oil producer to completely dominate the world market. One of the characteristics of the WTI crude oil is that it is much lighter than Brent. It is also called Texas Light Sweet because of its low sulfur content (0.24%), which makes of it a sweet crude oil.

We also explain what oil blends are (like Brent and WTI), and ways you can speculate on live crude oil spot prices without having to buy physical barrels. The world crude oil market is all about investor anticipation of supply and demand, and oil prices are very volatile and highly influenced by consumer and investor sentiment. As such, global events such as the COVID-19 pandemic can send shockwaves throughout the market. Technological developments and changes in resource distributions along the oil supply chain will also impact crude oil spot prices.

Until a few years ago, the price per barrel of WTI oil was systematically quoted at 1 U.S. Dollar more than that of Brent oil which is heavier and therefore less easy to refine. If you look at the disconnect between the two benchmarks now, and it has narrowed to about $3 – the market has levelled out. 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.

Brent vs. WTI Crude Oil Prices Compared

This has been dubbed the American shale revolution, and the increased production led oil prices to fall from above $100 to below $50 from 2014 to 2015. Offshore oil rigs, despite being in the news more often, most famously with the BP oil leak of 2010, are heavily traded as barometers of domestic oil market health. Brent Crude is the benchmark used for the light oil market in Europe, Africa, and the Middle East, originating latest tron price and analysis from oil fields in the North Sea between the Shetland Islands and Norway. West Texas Intermediate is the benchmark for the U.S. light oil market and is sourced from U.S. oil fields. Oil benchmarks describe where the commodity originates, which determines its use and allows investors to track the price of a specific oil type. WTI crude oil can be characterised by its lightness as it is in fact lighter than Brent crude oil.

Therefore, it cannot be held responsible for any litigation or financial loss following the use of one of these contents. It is possible to consult the WTI historical prices on the Energy https://www.forex-world.net/strategies/4-best-scalping-trading-strategies/ Information Administration website of the department of energy. Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator.

More technically, WTI oil has an API density of 39.6 and a specific density of around 0.827. West Texas Intermediate (WTI) is a trading classification of crude oil and one of the most commonly used benchmarks in oil prices. Theoretically, WTI crude should trade at a premium to Brent crude, given the quality, but this is not always the case. 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 its individual market fundamentals.

The difference in price between Brent and WTI is called the Brent-WTI spread. From time to time new oil resources come online — like Canadian oil sands or US crude oil from oil shale — these add to the global supply. New sources can exert a downward force on oil prices, even in times of heavy demand. WTI and Brent are the two major types of crude oil but they have certain specific differences. 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.

Supply and Demand

To understand how world events can cause the spread between Brent and WTI to move dramatically for long periods, look back a few years. Because of the coronavirus outbreak, the International Energy Agency (IEA) cut its forecast for global oil demand in March 2020, predicting the first year-over-year decline in demand since 2009. Extraction costs are typically higher for new resources, meaning these oils are only competitive in lower-supply, high-price environments. Trade-Oil.com is neither a brokerage company nor an investment consulting firm and is not intended to recommend any particular service.

West Texas Intermediate (WTI)

Several indicators are taken into account in the price calculation of the WTI barrel. Of course, it is mainly the law of supply and demand that influences the prices, but other fundamental factors can also have a more or less pronounced effect. The Cushing hub delivery system consists of 35 (20 inbound and 15 outbound) pipelines and 16 storage terminals. The hub has 90 million barrels of storage capacity and accounts for 13% of U.S. oil storage. Oil refining in the U.S. typically produces up to 20 gallons of standard automobile gasoline and up to 12 gallons of diesel fuel (or “heating oil”) per barrel. The IEA predicted in its February 2021 report that demand would recover 60% of its 2020 losses over the course of the year.

WTI crude had a series of rallies and tumbles to reach a year-high price of $84.06 per barrel in late October 2021. There has been a trend, due to advancements in oil drilling and fracking, of West Texas Intermediate becoming cheaper than Brent Crude oil. Prior to this, Brent Crude tended to be cheaper than West Texas Crude.