For the purposes of trading on futures exchanges in London or New York, however, reference oils are used. These are standardised products used to determine the prices for all other types. The reference oil traded most frequently and of major significance for the USA is West Texas Intermediate (WTI), while the most important in Asia is Dubai Fateh. Other reference oil types include Leona, Tijuana, Alaska North Slope, Zueitina or Urals.
Price Differences and the WTI-Brent Spread
Brent is also tied to more worldwide oil markets, meaning that more factors are influencing its price. Oil benchmarks are important because it describes where the commodity comes from, which is an important factor in determining its use. Benchmarks also enable traders and investors to track the price of a specific Automated trading oil type. WTI (West Texas Intermediate) oil – US crude with IG – is a blend of several oils drilled and processed in the United States.
Brent Oil vs Crude Oil from West Texas
A reliable broker simplifies the trading process while providing essential market insights. However, it’s important to remember that trading involves risk, and gains are not confirmed. Hence, traders should always conduct thorough research, practice proper risk management, and consider consulting with a financial advisor if they’re new to trading or need personalized guidance. However, waiting for a pullback or retracement before entering the trade is important to reduce risk. Similarly, traders may short the trade when the price breaks below a support level, expecting a downward trend. WTI is primarily produced in the United States, specifically in the Permian Basin region of Texas.
- CFDs also offer leverage, allowing traders to control larger positions with smaller capital.
- Another factor that can lead to significant differences between Brent Crude and West Texas Intermediate is geopolitical trouble.
- The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
- It reflects the health of the domestic energy sector and is influenced by U.S.-centric factors such as shale oil production, storage levels, and pipeline infrastructure.
- Trading WTI Crude Oil requires combining technical analysis, fundamental analysis, and risk management.
- Brent crude is actually a blend of oil from more than a dozen oil fields located in the North Sea.
- For example, NYMEX WTI-Brent spread options on CME Globex experienced record trading volume from 2011 to 2013 after a glut in U.S. crude sent WTI prices in a tailspin relative to Brent.
Global adoption of WTI assessed prices as oil benchmark prices
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- You can go long or short on the spot price of Brent crude and WTI oil using derivatives, namely CFDs and spread bets.
- The solution came in the form of crude oil futures, which are tied to a specific benchmark crude.
- Known for its superior quality due to low sulfur content and high API gravity, WTI reflects U.S. production and consumption trends.
- CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
- Despite being slightly heavier than WTI, Brent is well-suited for refining into middle distillates such as diesel and kerosene, which are in high demand globally.
- Brent Crude originates from the North Sea, encompassing oil from fields between the United Kingdom and Norway, like Brent, Forties, Oseberg, Ekofisk, and Troll.
Oil (WTI)
This location near Europe provides Brent with easy access to international markets across Europe, Asia, and cryptocurrency broker canada Africa, facilitated by established shipping routes. Its strategic geographic position is a key factor behind its role as a global benchmark for crude oil prices. This makes it perfect for gasoline manufacturing, and it is frequently preferred in U.S. markets. WTI crude oil is priced primarily on the New York Mercantile Exchange (NYMEX), and its price is a reliable indication of U.S. oil market movements. Historically, WTI was the dominant benchmark in the United States and Canada.
Why Is Oil Called Brent Crude?
ATFX allows traders to bet on the WTI and Brent crude price swings without physically buying the oil. This flexibility allows traders to profit from rising and falling oil prices while leveraging their holdings for maximum rewards. ATFX’s platform also provides risk management tools, competitive spreads, and professional-grade market research to help traders of all skill levels. Understanding the distinctions between WTI and Brent crude oil is critical for anybody interested in the global energy industry. While WTI substantially impacts U.S. markets, Brent plays a vital role in Europe, Africa, and beyond. Both are necessary for price fixing but react differently to global events such as geopolitical conflicts and supply-demand fluctuations.
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. WTI and Brent, however, are both considered high-quality oils and therefore are the two https://www.forex-world.net/ most important oil benchmarks in the world. But WTI’s reign as the global oil benchmark was overthrown by Brent crude in 2013. You can invest directly in oil company shares, such as BP or Royal Dutch Shell, and profit if the share price goes up.