West Texas Light Sweet Crude oil contracts deliver in Cushing, Oklahoma. “Spot price” is another way of referring to the market price for a commodity, so the Cushing spot price is the price at which you can buy or sell a barrel of oil that delivers in Cushing. The nominal price of crude oil is just one factor involved in understanding the crude oil market. Brent crude oil futures trade on the Intercontinental Exchange (ICE). Brent crude is traded internationally, so the delivery locations will vary by country.
Technological developments and changes in resource distributions along the oil supply chain will also impact crude oil spot prices. The increased focus on renewable energy is already accelerating such changes. Just like there are different types of crude oil, there are also different crude oil blends, typically classified according to their capacity to be refined into gasoline.
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). As with all commodities, oil prices are driven by supply and demand. 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. Other countries often use both Brent and WTI as benchmarks to value their crude oil.
- There are three major types of crude oil throughout the world that are used as oil reference prices according to their production zones.
- Factors related to supply and demand, including production interruptions and geopolitical influences, can widen the spread.
- It then travels through pipelines where it is refined in the Midwest and the Gulf of Mexico.
After the extraction, WTI travels to the Gulf of Mexico and goes through the refineries. WTI crude oil’s spot price was at $70.40 per barrel one month ago. Compared to today’s price of $76.78 per barrel, the price is up by 9.06%. Exactly one month ago, Brent crude oil’s spot price was at $76.14 per barrel. Compared to today’s price of $81.94 per barrel, the price is up 7.62%.
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But first, let’s explore the different type of crude oil blends. 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. Until a few years ago, the price per barrel of WTI oil was systematically quoted at 1 U.S. Dollar more than that of Brent oil which is heavier and therefore less easy to refine.
Brent is also tied to more worldwide oil markets and serves as an international benchmark, meaning that more factors are influencing its price. Furthermore, transporting WTI overseas to Brent crude’s market could come at a cost that would make WTI unable to compete with Brent crude in terms of pricing. Theoretically, WTI crude should trade at a premium to Brent crude, given the quality, but this is not always the case. WTI crude oil is a specific grade of crude oil and one of the main three benchmarks in oil pricing, along with Brent and Dubai Crude. It is one of the highest-quality oil, produced mainly in Texas, US.
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Access to Electronic Services may be limited or unavailable during periods of peak demand, market volatility, systems upgrade, maintenance, or for other reasons. 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.
Prior to this, Brent Crude tended to be cheaper than West Texas Crude. 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. 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. Oil benchmarks describe where the commodity originates, which determines its use and allows investors to track the price of a specific oil type.
] local trade between oilfield production and refineries around Midland, Texas, and Cushing, Oklahoma, could be said[by whom? Today’s live Brent crude oil spot price is at $81.94 per barrel. Brent crude oil trades six days a week, so based on which day you’re looking at crude oil spot prices, you may be getting the last recorded live price. At local time on Sundays high low indicator mt4 for your chosen exchange, you’ll almost certainly get the last Brent crude oil spot price that the market closed with. West Texas Intermediate, more generally represented by the initials WTI, is also sometimes called Texas Light Sweet by certain brokers. This quotation is priced on the New York Mercantile Exchange, which is the principal world commodities exchange.
In the US, however, the production advantage lies in new extraction technologies, such as well stimulation techniques and horizontal drilling. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. Most of the time, the WTI is refined directly in the United States, mainly in the Midwest and near the Gulf Coast for practical reasons as the production sites are nearby. WTI only contains 0.24% sulfur and has an API gravity of approximately 39.6.
Benchmarks and Trading Markets
In the trading world, WTI is primarily a benchmark for the US oil market. When it comes to pricing, oil quality isn’t the only consideration. Location, delivery logistics, and global supply and demand also play a part in oil trading. There has been a trend, due to advancements in oil drilling and fracking, of West Texas Intermediate becoming cheaper than Brent Crude oil.
However, since it is drilled in Northwest Europe, most of the oil is refined nearby in that region. Then, in late 2011, the Iranian government threatened to close the Straits of Hormuz, through which approximately 20% of the world’s oil flows. Once again, the spread widened, as Brent soared to a $25 premium per barrel higher than WTI. Fears concerning the closure of the Suez Canal and a lack of available supply caused Brent crude oil to become more expensive than WTI. As tensions eased over the canal’s operation, the spread reduced. The IEA predicted in its February 2021 report that demand would recover 60% of its 2020 losses over the course of the year.
What is crude oil?
There are three major types of crude oil throughout the world that are used as oil reference prices according to their production zones. Therefore, for European oil, Brent from the North Sea acts as the reference, whereas for the OPEC countries, it is the Dubai crude which is referred to for the price determination. https://bigbostrade.com/ Crude oil flows “inbound to Cushing from all directions and outbound through dozens of pipelines”.[16] It is in Payne County, Oklahoma, United States. Since the shale boom in the U.S., which resulted in a production increase of WTI, the price of WTI has gone down and usually trades at a discount to Brent.
In contrast, West Texas Intermediate is produced in landlocked areas, making transportation costs more onerous. Light Sweet Crude Oil futures and options, in particular West Texas Intermediate futures, are the most actively traded energy product in the world. This guide explains exactly what the oil spot price represents and what factors determine the constantly moving live price. Brent crude is refined all over the world by the refineries that purchase the barrels of crude oil.
There are different ways to trade Brent crude and WTI, depending on your preferences. One of the most common ways to buy and sell oil is via futures, but there are also other ways to get exposure to the commodity. American Petroleum Institute (API) gravity refers to the density of the oil – measured on a scale from ten to 70. Light sweet oils flow more freely at room temperature, making them easier and cheaper to refine. Futures and futures options trading involves substantial risk, and is not suitable for all investors.
