Crude oil tops the list of the most traded commodities internationally, and for good reason. This highly-valued resource serves as a powerful political force in many parts of the world.
WTI vs Brent: what are the differences?
There are 5 key differences between WTI and Brent crude oil:
Brent and WTI trading
Brent and WTI oil prices
Western Texas Intermediate, or WTI, is extracted and produced mainly in the United States. Extraction occurs primarily in Texas, North Dakota and Louisiana, before being transported to Oklahoma for delivery.
In the early 2000s, new technological development enabled extracting oil from shale rock. It caused the so called Shale Revolution and significantly increased oil production in the United States.
Brent Crude represents a mixture of four crude oils, including Brent, Forties, Osberg and Ekofisk. Known together as BFOE, Brent crude is mainly extracted from the oil fields in the North Sea.
Oil prices are significantly driven by volatile political situations in major oil producing countries and OPEC’s fluctuating oil production levels.
A large part of the national income of the key members of the Organisation of Petroleum Exporting Countries (OPEC), including Saudi Arabia, Iraq, Iran Nigeria and Venezuela, comes from crude oil. OPEC claims to ensure price stability by means of increasing or decreasing oil production in the region.
Brent oil traders should carefully watch for tensions rising in the Middle East, as the area is home to some of the biggest crude oil producers. Geopolitical tensions may cause sharp movements in the oil price, speculating on the lack of oil supplies.
Similarly, WTI oil traders will be watching for the demand and supply factors in the United States. Disruptions to either Brent or WTI may cause the Brent-WTI spread to change, with one market moving aggressively relative to the other.
Composition of Brent and WTI
The price of the two oil benchmarks also varies due to the differences in their composition. WTI and Brent have different API gravity and sulfur content, which can influence their price.
WTI’s sulfur content is 0.24%, while the sulfur content of Brent is 0.37%. The lower sulfur content means that the oil is ‘sweeter’ and easier to refine. According to this parameter, both oil types are considered as sweet crudes.
Oil’s gravity is usually ranked on a 10 to 70 scale. The higher the number, the lower oil’s density. It means that if the API of oil is high, it will easily float on water, and if it’s low, it may sink. WTI and Brent crude are both considered relatively light oils.
WTI trading vs Brent trading
There are a number of ways to trade the world’s oil markets. One of the most popular ways to trade oil is through futures contracts.
WTI futures could be traded on the New York Mercantile Exchange (NYMEX), managed and owned by the CME Group. WTI futures are deliverable in a transshipment point in Cushing, Oklahoma. Brent futures are traded on the Intercontinental Exchange (ICE) in London.
WTI and Brent futures have the following specifications:
US Dollars and Cents
US Dollars and Cents
However, if you’re not interested in trading oil through traditional stock exchanges, you have another popular option – contracts for difference (CFDs). In the case of CFDs, you speculate on the difference of oil price fluctuations, but don’t buy the asset itself.
Moreover, a CFD is a leveraged product, meaning that you have to deposit only a particular portion from the total value of a trade you want to open – the rest is covered by your CFD broker. It makes CFDs much more accessible.
Brent versus WTI oil prices
Historically, WTI oil traded higher than Brent crude. However, the Shale Revolution that increased WTI oil production caused a decline in the WTI oil price. WTI had to step down and let Brent take the lead.
WTI still remains the benchmark for oil prices in the US. However, two-thirds of all oil traded belongs to Brent crude. It makes Brent the primary oil benchmark in the world.
The difference in WTI and Brent oil prices is known as WTI vs Brent spread and differs from time to time due to supply and demand, geopolitics, weather conditions and regulation.
As of the end of February, the latest WTI oil price stood at around $56 per barrel, while Brent crude was valued at $65 per barrel. Follow the latest oil prices to make thoughtful trading decisions.
Read more about oil trading:
Brent vs WTI crude oil: Top 5 differences between the world’s major oil benchmarks