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.
About WTI Light Crude Oil
The price of WTI is quoted on the NYMEX, or New York Mercantile Exchange, which is the American market where all the commodities are quoted. 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. 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.
How much gasoline is produced by one barrel of crude oil?
WTI only contains 0.24% sulfur and has an API gravity day trading patterns of approximately 39.6. The oil is primarily refined in the Gulf Coast and Midwest areas of the United States. Trade-Oil.com is neither a brokerage company nor an investment consulting firm and is not intended to recommend any particular service. Therefore, it cannot be held responsible for any litigation or financial loss following the use of one of these contents.
Adoption of WTI futures for investment purposes
Additionally, their sulfur content is different, which determines if one is sweeter than the other. WTI has less sulfur than Brent, making it sweeter, and, therefore, easier to refine. In addition to futures, market participants can also invest in options that are linked to a particular crude benchmark.
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. In contrast, West Texas Intermediate is produced in landlocked areas, making transportation costs more onerous.
Besides its primary role as the most important energy source, crude oil is also an essential raw material for manufacturing plastics. Because the supply of crude oil is limited but demand is constantly increasing, the price of oil is also continuously rising. Because crude oil is needed to manufacture other primary materials, it is the world’s most important commodity.
The market for crude is incredibly diverse, with the quality and original location of the oil making a major impact on price. Because they’re relatively stable, most crude oil prices worldwide are pegged to the Brent, WTI, or Dubai benchmarks. Crude oil flows “inbound to Cushing from all directions and outbound through dozens of pipelines”.[16] It is in Payne County, Oklahoma, United States. ICE Brent Crude is a specific futures contract offered by Intercontinental Exchange (ICE). It is traded in U.S. dollars, and it trades on exchanges in New York, London, and Singapore. 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).
- The less expensive it is to deliver the product, the cheaper it is for the consumer.
- West Texas Intermediate is the benchmark for the U.S. light oil market and is sourced from U.S. oil fields.
- Until a few years ago, the price per barrel of WTI oil was systematically quoted at 1 U.S.
- Once again, the spread widened, as Brent soared to a $25 premium per barrel higher than WTI.
- ] local trade between oilfield production and refineries around Midland, Texas, and Cushing, Oklahoma, could be said[by whom?
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. In colloquial usage, WTI usually refers to the WTI Crude Oil futures contract traded on the New York Mercantile Exchange (NYMEX). Oil produced from any location can be considered WTI if the oil meets the required qualifications.[2] Spot and futures prices of WTI are used as a benchmark in oil pricing.
One of the characteristics rba keeps interest rates at record of the WTI crude oil is that it is much lighter than Brent. It is also called Texas Light Sweet because of its low sulfur content (0.24%), which makes of it a sweet crude oil. More technically, WTI oil has an API density of 39.6 and a specific density of around 0.827. There are different types of crude oil—the thick, unprocessed liquid that drillers extract below the earth—and some are more desirable than others.
Political shifts, weather events, and global health crises have been some of the biggest shock factors in the oil market. Several indicators are taken into account in the price calculation of the WTI barrel. Of course, it is mainly the law of supply and demand that influences the prices, but other fundamental factors can also have a more or less pronounced Which best describes the difference between preferred and common stocks effect. Because of the dynamic nature of supply and demand, the value of each benchmark is continually changing. Over the long term, a marker that sold at a premium to another index may suddenly become available at a discount. 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.
Therefore, Brent prices moved lower by virtue of hints of more Iranian crude, and WTI strengthened because of less U.S. production and increasing exports. It is important to notice that mere anticipation of an influx of oil into the market was enough to cause price fluctuations. The percentage of sulfur in crude oil determines the amount of processing needed to refine the oil into energy products. 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. But all geopolitical current events in connection with oil production also influence the WTI prices.
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. At the end of 2010 the price difference between the two benchmarks widened, and then narrowed at the end of 2013. It is possible to consult the WTI historical prices on the Energy Information Administration website of the department of energy.