The oil is considered to be very light, with a low sulfur content – considerably lighter and sweeter than Brent Crude, Dubai, or Oman. 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. Investors can also gamble on what will happen to the difference, or spread, between two benchmarks. Participants typically analyze the fundamentals of a specific oil source and guess whether the gap between two markers will widen or close. Like traditional oil options, these “spread options” are available on major exchanges. The price of oil is a major factor in the overall health of the energy sector and is one of the most heavily traded commodities as it is influenced by almost every global, macro event.
Over the long term, a marker that sold at a premium to another index may suddenly become available at a discount. Brent Crude is the benchmark used for the light oil market in Europe, Africa, and the Middle East, originating 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. 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.
Exxon says oil and gas will still be the dominant sources of energy by 2050
Speculators are also major players in the market, betting that changes to supply or demand will drive the price of certain crude products higher or lower. There was once a time when buyers would primarily purchase crude oil on the spot market—that is, they’d pay the current price and accept delivery within a few weeks. However, after the oil crisis of the late 1970s, refiners and government buyers began looking for a way to minimize the risk of sudden price increases. It is of course possible to invest in WTI crude oil from just about anywhere around the world.
Brent Crude vs. West Texas Intermediate (WTI): The Differences
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. 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. 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. Both benchmark oils are considered sweet, but WTI is sweeter, making it a bit easier to refine. That honor goes to Brent, which is used as a benchmark globally in two-thirds of oil contracts.
It is often priced one dollar more than the Brent and two dollars more than the Dubai. However, sometimes the WTI barrel is less expensive than the Brent barrel, but this difference has never historically exceeded 27 dollars. Crude oil is a mixture of hydrocarbons found in liquid form underground and brought to the surface for refining into fuel and other products. Petroleum products are processed in refineries from crude oil and other liquids. Petroleum is a broad term that includes both crude oil and petroleum products. Because of the dynamic nature of supply and demand, the value of each benchmark is continually changing.
The lower the sulfur content of an oil, the easier it is to refine, making it more desirable to producers. WTI and Brent, however, are both considered high-quality oils and therefore are the two most important oil benchmarks in the world. 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.
Exxon says oil and gas use will remain high until the middle of this century, as the world population hits 10 billion people and energy needs grow. The less expensive it is to deliver the product, the cheaper it is for the consumer. From a transportation standpoint, oil extracted at sea has certain advantages over land-based supplies, which depend on the capacity of pipelines. Both Brent Crude and WTI are light and sweet, making them ideal for refining into gasoline. Until a few years ago, the price per barrel of WTI oil was systematically quoted at 1 U.S.
- In order to best anticipate the movements and evolution of its prices through CFDs, it is therefore necessary to know their specificities and main characteristics.
- This quotation is priced on the New York Mercantile Exchange, which is the principal world commodities exchange.
- On an international level there are a number of different types of crude oil, each of which have different properties and prices.
- In December 2005 the global demand for crude oil was 83.3 million barrels per day according to the International Energy Agency (IEA) and this will continue to rise further.
WTI Crude Oil Price Per Barrel
WTI crude oil can be characterised by its lightness as it is in fact lighter than Brent crude oil. It contains approximately 0.24% of sulphur which means it is a ‘light’ crude oil. Its production sites and its properties therefore make it ideal for refining in the United States.
About WTI Light Crude Oil
It is possible to consult the WTI historical prices on the Energy Information Administration website of the department of energy. As for the WTI crude oil, it is quoted in almost all economic announcements from this sector in the United States and North America. 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. The top five source countries for petroleum products imported into the U.S. are Canada, Mexico, Saudi Arabia, Iraq, and Brazil. The hub has 90 million barrels of storage capacity and accounts for 13% of U.S. oil storage.
There has been a trend, due to advancements in oil drilling and fracking, of West Texas Intermediate becoming cheaper than Brent Crude oil. 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. Brent Crude is more ubiquitous, and most oil is priced using Brent Crude as the benchmark, akin to two-thirds of all oil pricing. Brent Crude is produced near the sea, so transportation costs are significantly lower. In contrast, West Texas Intermediate is produced in landlocked areas, making transportation costs more onerous.
Oil benchmarks describe where the commodity originates, which determines its use and allows investors to track the price of a specific oil type. This post is for educational purposes and should not be considered as investment advice. The financial transaction services present on this site in the form of advertising are totally independent from trade-oil.com and are provided for information purposes only. Despite all the care taken during the writing of our articles fx trader magazine there is still a slight risk of errors made in the information given. Please do not hesitate to report them to us in the case whereby you find a mistake.
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. Other reference oil types include Leona, Tijuana, Alaska North Slope, Zueitina or Urals. 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.
The commodity of crude oil is by far the world’s most important energy source and the price of oil therefore plays an important role in industrial and economic development. The most important type of crude oil used in Europe is Brent Crude, named after the https://forexanalytics.info/ North Sea oilfield where it is extracted. Brent Crude is a particularly light crude oil which is carried from the North Sea to the Sullom Voe Terminal on Mainland, Shetland by an underwater pipeline. The market for crude is incredibly diverse, with the quality and original location of the oil making a major impact on price. Because they’re relatively stable, most crude oil prices worldwide are pegged to the Brent, WTI, or Dubai benchmarks.