West Texas Intermediate is the benchmark for the U.S. light oil market and is sourced from U.S. oil fields. 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 how to calculate arbitrage in forex includes both crude oil and petroleum products. In 2023, the U.S. imported about 8.51 million barrels per day of petroleum products from 86 countries.
Crude Options
In December 2005 the global demand for crude oil was 83.3 million barrels per day according to the International Energy Agency (IEA) and this will continue to rise further. The solution came in the How to buy arcade form of crude oil futures, which are tied to a specific benchmark crude. With futures, buyers can lock in the price of a commodity several months, or even years, in advance.
Brent vs. WTI Crude Oil – What is the Difference?
This grade is described as light crude oil because of its low density and sweet because of its low sulfur content. 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 atfx review demand is constantly growing, the price of oil is also continuously rising.
Understanding West Texas Intermediate (WTI)
WTI continues to be the main benchmark for oil consumed in the United States. In the United States, West Texas Intermediate is the preferred measure and pricing model. As of August 31, 2021, WTI was trading at around $68.50 per barrel, while Brent traded at $72.85.
- Political instability, wars, and sanctions can disrupt supply and impact prices.
- The oil futures contract on the New York Mercantile Exchange has WTI as its underlying asset.
- However, it is important to note that investing in WTI futures can be risky, as oil prices can be volatile and affected by various other factors.
- Of course, tightening global supply will ensure that there will be demand for the light, sweet Texas tea.
- “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.
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). 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. Brent crude is actually a blend of oil from more than a dozen oil fields located in the North Sea.
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. West Texas Intermediate (WTI) is a trading classification of crude oil and one of the most commonly used benchmarks in oil prices. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price.
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. WTI only contains 0.24% sulfur and has an API gravity of approximately 39.6. The oil is primarily refined in the Gulf Coast and Midwest areas of the United States.
