During times of crisis, the spread blows out as political uncertainty leads to surges in Brent Crude prices. West Texas Intermediate is less affected because it is based in landlocked areas in the United States. A surge of WTI production has led many traders to consider it an important pricing benchmark vs. Brent, if not even close to the total production of the latter.
- In contrast, West Texas Intermediate is produced in landlocked areas, making transportation costs more onerous.
- ICE Brent Crude is a specific futures contract offered by Intercontinental Exchange (ICE).
- 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.
- It is traded in U.S. dollars, and it trades on exchanges in New York, London, and Singapore.
- There are three major types of crude oil throughout the world that are used as oil reference prices according to their production zones.
Many energy analysts predict that oil could soon touch $100 a barrel, even as electric cars become more popular and the coronavirus pandemic persists. Exxon Mobil and other oil companies that only a year ago were considered endangered dinosaurs by some Wall Street analysts are thriving, raking in their biggest profits in years. It is possible to consult the WTI historical prices on the Energy Information Administration website of the department of energy. As for the WTI crude oil, it is quoted in almost all economic announcements from this sector in the United States and North America. If you look at the disconnect between the two benchmarks now, and it has narrowed to about $3 – the market has levelled out. 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.
What is ICE Brent Crude?
It is important to notice that mere anticipation of an influx of oil into the market was enough to cause price fluctuations. Political shifts, weather events, and global health crises have been some of the biggest shock factors in the oil market. There has been a trend, https://www.dowjonesrisk.com/ due to advancements in oil drilling and fracking, of West Texas Intermediate becoming cheaper than Brent Crude oil. 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.
First, an agreement with Iran was struck, allowing the country to export more oil, which should have increased the amount of Iranian crude flowing into the market on a daily basis. Since Brent is the pricing benchmark for Iranian crude, that development depressed the price of Brent at the time. 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.
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. Besides its primary role as the most important energy source, crude oil is also an essential raw material for manufacturing plastics.
Other reference oil types include Leona, Tijuana, Alaska North Slope, Zueitina or Urals. WTI and Brent are the two major types of crude oil but they have certain specific differences. For example whereas WTI is the principal crude oil traded on the American markets, Brent is the primary crude oil in the petroleum sector on the European markets. It should be noted that certain differences exist relating to the composition and concentration of these two major types of crude oil. The significance of a benchmark in the oil market is that benchmarks serve as a reference price for buyers and sellers of crude oil. Though Brent crude and WTI crude are the most popular benchmarks, their prices are often contrasted.
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. The price of WTI tends to move in line with the price of Brent crude, although different global events will cause the value of each commodity to differ. At the end of 2010 the price difference between the two benchmarks widened, and then narrowed at the end of 2013.
Oil (Brent) Snapshot
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. Brent crude is refined all over the world by the refineries that purchase the barrels of crude oil. However, since it is drilled in Northwest Europe, most of the oil is refined nearby in that region. Fears concerning the closure of the Suez Canal and a lack of available supply caused Brent crude oil to become more expensive than WTI.