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. Theoretically, WTI crude https://www.broker-review.org/ 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 distinct market fundamentals.
Brent Crude and West Texas Intermediate (WTI): Oil Benchmarks
- The spread widened even more after Iran threatened to close the Strait of Hormuz, a shipping route through which 20% of the world’s oil was transported at that time.
- It is also called Texas Light Sweet because of its low sulfur content (0.24%), which makes of it a sweet crude oil.
- WTI and Brent, however, are both considered high-quality oils and therefore are the two most important oil benchmarks in the world.
- Oil prices are typically quoted per barrel — this is the same for the Brent crude oil spot price.
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 $81.81 per barrel, and the price of WTI crude oil is at $78.06 per barrel. Oil prices are customarily quoted in dollars (USD) around the world, not only in the US or when referring to US crude oil. In 2011, amid tensions in the Middle East, fears that the Suez Canal would be closed caused Brent prices to trade at a premium to WTI.
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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. 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.
Freight rate factors
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. Futures and futures options trading involves substantial risk, and is not suitable for all investors. Please read the Risk Disclosure Statement for Futures and Options prior axitrader review to trading futures products. The standard oil density measurement is based on American Petroleum Institute (API) gravity. With numbers falling between 10 and 70, the lighter the oil, the higher the API gravity number. For example, oils in the high API gravity range—light oils—often are light enough to float on water and are easier to refine.
Global Events
It should be noted that certain differences exist relating to the composition and concentration of these two major types of crude oil. West Texas Intermediate is a high-quality crude oil sourced in West Texas. As one of the world’s foremost sources of crude oil, WTI is a benchmark for the U.S. oil industry and investors. When you hear a reference to crude oil prices in a business report, it’s the price of West Texas Intermediate that is being quoted.
WTI vs. Brent Crude: What’s the difference?
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. Trading tends to be particularly heavy when one of the two benchmarks undergoes unusual volatility.
She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest. 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.
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. When trading online, investors often have the choice between different asset types according to the production zone of this commodity. The most available oil on the markets is called WTI which stands for ‘West Texas Intermediate’. 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.
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.
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. 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 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, more generally represented by the initials WTI, is also sometimes called Texas Light Sweet by certain brokers.
Political shifts, weather events, and global health crises have been some of the biggest shock factors in the oil market. Another factor that can lead to significant differences between Brent Crude and West Texas Intermediate is geopolitical trouble. During times of crisis, the spread blows out as political uncertainty leads to surges in Brent Crude prices. West Texas Intermediate is less affected because it is based in landlocked areas in the United States. 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.
Both benchmark oils are considered sweet, but WTI is sweeter, making it a bit easier to refine. It contains less than 0.50% sulfur, whereas the norm is about 0.24% to 0.34%, making it “sweet.” It also has a low density, making it “light.” Goldman Sachs named 23 Buy- and Sell-rated stocks across the energy sector to reflect its long-term views on the oil market. Extraction costs are typically higher for new resources, meaning these oils are only competitive in lower-supply, high-price environments.
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. Additionally, factors specific to each benchmark, such as infrastructure constraints or political stability in the respective regions, can affect their prices. Oil futures are traded on commodities exchanges, such as the New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE). These exchanges provide a platform for participants to buy or sell oil futures contracts. 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.
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