Brent vs WTI Crude Oil What is the Difference?

Since Congress lifted the ban, the West Texas oil field has how to learn to invest in the stock market nearly doubled its daily production levels. Yet I’m always surprised that most investors don’t take the time to learn the difference between them. You might not think that the slight difference in price means much… but the difference is actually vital — and one that every oil investor needs to understand. But before we get into the difference between Brent and WTI, let’s discuss each on their own. Another factor that can lead to significant differences between Brent Crude and West Texas Intermediate is geopolitical trouble.

Development of the physical WTI market

1. The hub has 90 million barrels of storage capacity and accounts for 13% of U.S. oil storage.
2. WTI continues to be the main benchmark for oil consumed in the United States.
3. The United States recently reclaimed its crown as the world’s top oil producer, averaging just under 20 million barrels per day.

It’s also still considered a sweet crude, despite having a higher sulfur content than WTI. The oil futures contract on the New York Mercantile Exchange has WTI as its underlying asset. The U.S. Department of Energy keeps records of past oil price information.

How does inventory data impact the price of WTI Oil

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. The weekly Oil inventory reports published by the American Petroleum Backtesting Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Their results are usually similar, falling within 1% of each other 75% of the time.

Because crude oil is needed to manufacture other primary materials, it is the world’s most important commodity. The US investment bank Goldman Sachs estimates the proportion of crude oil used for primary materials production to be 45 per cent. 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 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. West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.95 on Thursday.

In contrast, West Texas Intermediate is produced in landlocked areas, making transportation costs more onerous. 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.

The difference in price between Brent and WTI is called the Brent-WTI spread. WTI is the main oil benchmark for North America, as it is sourced from the United States. It originates mainly in the Permian Basin, the site of the nation’s highest-producing oil field. The oil travels via pipeline from foreign exchange rates and currency exchange rate calculator Texas to refineries in the Midwest and the Gulf of Mexico.

West Texas Intermediate (WTI)

OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia. At the time, our domestic production was flowing at a rate of 8.6 million barrels per day, with approximately 30% of that oil coming from Texas. Trading tends to be particularly heavy when one of the two benchmarks undergoes unusual volatility.

Most nations factor oil prices into their budgets, so OPEC has been considered a leading geopolitical force. WTI is the underlying commodity of Chicago Mercantile Exchange’s oil futures contracts (legally binding agreements to buy/sell a commodity at a specific month at a pre-determined price). A benchmark in the oil market serves as a reference price for buyers and sellers of crude oil. Oil benchmarks are frequently referred to in the media as the price of oil.