When trading oil as a commodity, you'll frequently encounter two major oil benchmarks: WTI and Brent Crude. Understanding the differences between these two oil types is essential for making informed trading decisions.
Origin and Production Locations
WTI (West Texas Intermediate):
Sourced primarily from oil fields in the United States
Extracted mainly from wells in Texas, Louisiana, and North Dakota
Serves as the benchmark for US-produced crude oil
Brent Crude:
Extracted from oil fields in the North Sea
Named after the Brent oil field, originally discovered by Shell
Serves as the international benchmark for crude oil pricing
Physical Properties
WTI:
Classified as "light sweet crude oil"
Lower sulfur content (0.24%)
API gravity of around 39.6° (lighter)
Easier and less expensive to refine into gasoline and diesel
Brent:
Also classified as "light sweet crude oil" but slightly heavier than WTI
Slightly higher sulfur content (0.37%)
API gravity of around 38.3°
Still relatively easy to refine compared to heavier crude varieties
Price Determinants
WTI Price Factors:
US oil production levels
US storage capacity (particularly at Cushing, Oklahoma)
North American pipeline capacity
US domestic consumption patterns
Brent Price Factors:
Global supply and demand dynamics
Political stability in Middle East and other major producing regions
OPEC production decisions
International shipping and transportation costs
Trading Considerations
Trading Hours: Both WTI and Brent futures contracts are available for trading on FXTRADING.com with specific trading hours. Please check the current specifications in your Client Portal for the most up-to-date information.
Contract Specifications: The contract sizes, margin requirements, and trading conditions may differ between WTI and Brent. Always review the current specifications before opening positions.
Market Influence: While WTI is more reflective of the US market conditions, Brent is generally considered more representative of global oil prices. Approximately two-thirds of global oil contracts reference Brent prices.
Historical Price Relationship
Historically, WTI and Brent traded at similar prices, with WTI occasionally commanding a small premium due to its higher quality. However, since 2011, structural changes in oil transportation infrastructure and regional production dynamics have led to periods where Brent trades at a premium to WTI.
For the latest information on trading oil contracts with FXTRADING.com, please refer to the specifications in your Client Portal or contact our Service Hub for personalized assistance.