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Other reference oil types include Leona, Tijuana, Alaska North Slope, Zueitina or Urals. The types of crude oil come from regions as diverse as Alaska North Lope, Arab Light or Zueitina in Libya. These are standardised products used to determine the prices for all other types. 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.
Futures contract delivery
“Sweeter” crudes have less sulfur, which makes them much easier to refine into products like gasoline or diesel, and thus much more attractive to refiners. Yet I’m always surprised that most investors don’t take the time to learn the difference between them. 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. When trading futures and options, you’ll also use CFDs or spread bets. 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.
- As of August 31, 2021, WTI was trading at around $68.50 per barrel, while Brent traded at $72.85.
- Discover two of the most popular oil benchmarks in the world – Brent crude and West Texas Intermediate.
- The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate.
Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. Oil benchmarks are important because it describes where the commodity comes from, which is an important factor in determining its use.
The libertex review above chart indicates the West Texas Intermediate (WTI) crude oil futures. The chart tracks the price of a barrel of WTI crude oil over a selected period. The x-axis represents time, and the y-axis represents US dollar prices per barrel. There are different types of crude oil—the thick, unprocessed liquid that drillers extract below the earth—and some are more desirable than others. 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. Low-density, or “light” crude is generally favorable to the high-density variety for the same reason.
Brent crude vs WTI summed up
The “American Petroleum Institute Gravity” is called the “API Gravity,” a metric that evaluates how light or heavy crude oil is compared to water. 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. Benchmarks such as Brent, WTI, and Dubai serve this important purpose. When refiners justforex review: is justforex a reliable forex broker purchase a Brent contract, they have a strong idea of how good the oil will be and where it will come from. Today, much of the global trading takes place on the futures market, with each contract tied to a certain category of oil.
When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia. Extraction costs are typically higher for new resources, meaning these oils are only competitive in lower-supply, high-price environments. This guide explains exactly what the oil spot price represents and what factors determine the constantly moving live price. Of course, tightening global supply will ensure that there will be demand for the light, sweet Texas tea. Right now, more than 5 million barrels are extracted every day from West Texas oil fields.
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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. Because Brent is extracted at sea and not on land, there are certain advantages. Large volumes of oil can quickly and safely be transported in underwater pipelines. In the US, however, the production advantage lies in new extraction technologies, such as well stimulation techniques and horizontal drilling.
Spot Crude Oil Price: West Texas Intermediate (WTI) (WTISPLC)
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. 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. Brent crude is actually a blend of oil from more than a dozen oil fields located in the North Sea. Although considered both light and sweet, Brent is slightly heavier than WTI, with an API gravity of 38.06 and a sulfur content of 0.37%. The rise of Texas tea started back in the early 1980s, when the U.S. government’s decontrol of oil prices changed the trading mechanics of crude oil, which led to WTI’s commoditization.
The recent pandemic of 2019 took a toll on almost all sectors of the economy. West Texas Intermediate (WTI) crude oil price dropped significantly in 2020 due to the COVID-19 pandemic. With travel and industrial activity reduced, oil demand decreased, resulting in an oversupply in the market. An oil price war between Russia and Saudi Arabia also contributed to the decline in WTI prices, which hit historic lows in April 2020. You can go long or short on the spot price of Brent crude and WTI oil using derivatives, namely CFDs and spread bets. Derivatives enable you to open a position with a small deposit (margin) and speculate on rising or falling oil prices without ever owning the physical commodity.
Global Events
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. This information has been prepared by IG, a trading name of IG Markets Limited. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information.
Trading platforms
Benchmarks also enable traders and investors to track the price of a specific oil type. We want to clarify that IG International does not have an official Line account at this time. We have not established any official presence on Line messaging platform.
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.
WTI is produced in landlocked regions and must be transported to Best markets to trade the coast, where most refineries are situated, another significant factor contributing to its low value. Similarly, the Midwest region of the United States has an excess of oil. As a result, WTI currently trades at a “discount” to Brent oil’s price. The standard and eventual uses of oil drilling depend heavily on the field they come from; therefore, oil is traded using benchmarks.
