Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. 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. We also explain what oil blends are (like Brent and WTI), and ways you can speculate on live crude oil spot prices without having to buy physical barrels. 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.

  1. Oil benchmarks describe where the commodity originates, which determines its use and allows investors to track the price of a specific oil type.
  2. Discover the range of markets and learn how they work – with IG Academy’s online course.
  3. 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.
  4. This grade is described as light crude oil because of its low density and sweet because of its low sulfur content.
  5. Other reference oil types include Leona, Tijuana, Alaska North Slope, Zueitina or Urals.

You can invest directly in oil company shares, such as BP or Royal Dutch Shell, and profit if the share price goes up. Investing also enables you to receive dividends, if the company pays them, and earn shareholder rights. You can also trade shares via spread bets and CFDs, enabling you to go long or short on underlying prices. An example of this would be the Arab Spring in 2011, which sparked fears of reduced Brent crude supply.

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Though there are some correlations in composition and usage, all crude oils are not priced equally. The difference between the spot price of Brent crude and WTI is called the Brent/WTI spread. Factors related to supply and demand, including production interruptions and geopolitical influences, can widen the spread. The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate.

Oil benchmarking and pricing

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. While the two crude oil varieties can trade at similar price points, each one has its own unique supply and demand market, and therefore its price reflects its individual market fundamentals. In Brent crude oil’s instance, these reserves are under the seafloor, while WTI crude oil is extracted from reserves located under dry land. That’s the first component of oil prices — the extraction process and machinery required.

Oil prices are at their highest point since 2014.

Its production sites and its properties therefore make it ideal for refining in the United States. This refinery is mostly completed in the Midwest and the Gulf Coast areas. It should also be noted that the API gravity of WTI (West Texas Intermediate) is around 39.6° and its specific density is 0.827. The oil is considered to be very light, with a low sulfur content – considerably lighter and sweeter than Brent Crude, Dubai, or Oman.

Brent crude oil is a blended oil (a mix of brent, forties, oseberg and ekofisk) drilled from below the North Sea. In trading, Brent is one of the benchmarks for oil in the wider market, such as the Middle East, Europe and Africa. Oil benchmarks describe where the commodity originates, which determines its use and allows investors to track the price of a specific oil type. WTI is one of the most referenced benchmarks used in oil news reports on oil prices, along with the Brent price – which comes from the North Sea.

As of August 31, 2021, WTI was trading at around $68.50 per barrel, while Brent traded at $72.85. Brent Crude is the benchmark used for the light oil market in Europe, Africa, and the Middle East, originating from oil fields in the North Sea between the Shetland Islands and Norway. West Texas Intermediate is the benchmark for the U.S. light oil market and is sourced from U.S. oil fields. It is generally noted that the barrel price of crude WTI is slightly higher than that of the Brent or Dubai barrel. It is often priced one dollar more than the Brent and two dollars more than the Dubai.

West Texas Intermediate (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. WTI is known as a light sweet oil because it contains less than 0.50% sulfur (normally about 0.24% to 0.34%), making it “sweet,” and has a low density making it “light.” Oil prices are typically quoted per barrel — this is the same for the Brent crude oil spot price. Today’s WTI crude oil spot price of $77.44 per barrel is down 1.46% compared to one week ago at $78.59 per barrel. Today’s Brent crude oil spot price is at $82.47 per barrel, down by 0.73% from the previous trading day.

One of the characteristics 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 liteforex broker 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.

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.

Because crude oil is needed to manufacture other primary materials, it is the world’s most important commodity. The US investment bank Goldman Sachs estimates the proportion of crude oil used for primary materials production to be 45 per cent. The significance of a benchmark in the oil market is that benchmarks serve as a reference price for buyers and sellers of crude oil.

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. West Texas Intermediate (WTI) is a trading classification of crude oil and one of the most commonly used benchmarks in oil prices. Crude oil flows “inbound to Cushing from all directions and outbound through dozens of pipelines”.[16] It is in Payne County, Oklahoma, United States. 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. Another example is the 2020 oil price war between Russia and Saudi Arabia, known as the OPEC crash. Brent crude plummeted to $33.36 (down by 24%) and US oil prices tumbled to $27.34 (down by around 34%).

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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. But all geopolitical current events in connection with oil production also influence the WTI prices. 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 effect.

It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. 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 oil type.

Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors. We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. WTI stands for West Texas Intermediate (occasionally called Texas Light Sweet), an oil benchmark that is central to commodities trading. It is one of the three major oil benchmarks used in trading, the others being Brent crude and Dubai/Oman. Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors.

The price of oil is a major factor in the overall health of the energy sector and is one of the most heavily traded commodities as it is influenced by almost every global, macro event. The Organization of the Petroleum Exporting Countries (OPEC) controls most of the oil production and distribution, often dictating costs for not only oil suppliers but countries as well. Most nations factor oil prices into their budgets, so OPEC has been considered a leading geopolitical force.

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