Oil is considered among the top frequently traded commodities across the globe, and for a practical reason.
Oil can also collapse the economies as it is a consistent part of politics. There are many variants of petroleum, among which BRENT and WTI are the biggest sellers. For better knowledge, let’s differentiate Crude oil and WTI, where precise trading decisions can be made.
WTI vs. Brent
The difference between Brent crude and WTI crude oil is that WTI originates from U.S. oil fields, and Brent Crude originates from oil fields in the North Sea. Usually, WTI is slightly “sweeter,” “lighter,” and lower in price than Brent.
- Location of Extraction
- Geopolitical Scenarios
- Benchmark and Prices
- Trading Platforms for WTI and Brent crude
- Composition and Content
1. Location Of Extraction
WTI (Western Texas Intermediate)
Extraction of WTI is done from the fields of oil in the USA. First, WTI is extracted in North Dakota, Texas, and Louisiana, and later on, it is conveyed to Oklahoma, Cushing by dint of pipeline.
Technological up-gradation during the span of the earliest 2000 made it achievable to extract the oil from the sedimentary rock, which was nearly inaccessible at that particular time. And as a result, it boosted the oil-producing capacity of the USA, which in turn denominated the Shale Revolution.
Extraction of crude oil is executed from the fields of oil located at the North Sea. ‘Brent Crude’ is a combination of four natural Oils, namely the Forties, Brent, Ekofisk, and Osberg, which is designated as BFOE.
2. Geopolitical Scenarios
Geopolitical prompt – Speaking of which unstable political structure of nations producing oil and OPEC’s ascending and descending levels of producing crude – can affect oil prices on a large scale. And it is very much crucial for Traders to understand how it differs for Brent oil and WTI.
The world’s major oil-producing countries except the U.S. depend on Brent oil to harmonize the economy. But unfortunately, the political structure of these nations was quite inconsistent, which inflated oil prices – specifically, Brent crude, And hence oil production is challenged.
Out of the list, many nations are part of the OPEC (Organization of the Petroleum Exporting Countries). Venezuela, Iraq, Iran, Nigeria, and Saudi Arabia are significant representatives. A compelling part of their nation’s income is achieved from Brent Crude itself. The primary duty of OPEC is to assure stable rates, despite having a surge or drop in the oil production capacity by its representatives.
As we talk about dealing Brent crude, Crude oil dealers are the ones to be watched upon for rising pressure in the Middle Eastern continent of Asia, as it is the tremendous global producer of Crude oil. Due to Geopolitical tension, Sudden or gradual loss in the supply of Crude Oil can be experienced by the market, which, on the other end, can cause sensitive price movement.
Meanwhile, supply and demand factors will be supervised by the WTI dealers in the United States. Suppose any interruption is experienced to either WTI crude or Brent crude. In that case, it can cause the spreading change to Brent-WTI, giving another reason to either market to act combatively compared to others.
3. Benchmark and Prices For Brent Oil and WTI
Previously, WTI was superior to Brent in terms of trading. But after the Shell Revolution, which took place in the early 2000s ( when the production of WTI increased) and more quantity was supplied from Canada to the U.S., the value of WTI reduced. However, It is now traded at an economical cost compared to Brent.
Currently, in the U.S., WTI is the benchmark for oil rates, whereas Brent is the global benchmark globally because nearly two-thirds of all oil contracts are made with its respect.
General rate variations between WTI and Brent are acknowledged as WTI vs. Brent Spread. There will be a change in spread after every specific time interval because the supplies and requirements of all the crude oil are directly proportional to regulations, geopolitics, and weather.
4. Trading Platforms for Brent and WTI
Depending on your country of residence, we have several different places to trade Crude Oil. Perhaps the best direction to Deal with Brent crude is via future contracts, but to be more precise, there can be differences between Brent crude and WTI.
NYMEX (New York Mercantile Exchange) deals with WTI futures contracts, And it is owned by the CME (Chicago Mercantile Group). Oklahoma, Cushing has the output for other agreements of WTI. Cushing is facilitated with a transmitting point. Also, bisecting conduits and storehouses with friendly admittance to refiners and suppliers are provided.
ICE (Intercontinental Exchange) in the capital of England holds the authority to trade Brent futures contracts.
The Specific details for Brent and WTI are as under:
|Priced in||U.S. Dollars and Cents||U.S. Dollars and Cents|
|Contract Size||1,000 barrels||1,000 barrels|
Official trading times for Brent and WTI also differ.
Trading Hours for WTI Futures
Sunday-Friday 1700hrs to 1600hrs as per C.T. (Chicago Time) accompanied by a sixty-minute respite each day commencing at 1600hrs C.T.
Brent Futures Trading Hours:
Sunday-Friday from 1900hrs to 1700hrs C.T. the other day.
5. Brent and WTI: Content and Composition
The sulfur content and API gravity of Brent and WTI are very different, which is directly proportional to the price of the oils.
While the Sulfur content in WTI is 0.24%, the Amount of sulpSulphurBrent is 0.37%. The Lower Sulphur content of oil proves to be more candied and is uncomplicated to refine. As a result, both Brent and WTI are pleasant crude.
On a scale of 10 to 70, the gravity of oil is rated, and according to the scale, the higher the number, the less dense the oil is. So, to be more precise, if the API of oil is higher than 10, the oil will hover on the surface water, and if it is lower than 10, the oil will go down. Therefore, both Crude oil and Brent are comparatively light oils.
|Content of Sulphur||0.37%||0.24%|
Traders would like to keep an eye on the supplies and requirements cycle variation. For instance, as per the IMO 2020 act, the demand for light and pleasant crude may increase, so demand for WTI and Brent may rise.
Brent vs. WTI: Summary
Despite listing the five most effective differences between Brent crude and WTI, a classic trade of these oils happens within a standard spreading interval between each other. Sometimes, when the limitations of supplies and requirements move either petroleum longer concerning another – similar issues in the Middle Eastern continent of Asia or force majeure in Northern America, two of them can result in abandoning eradication or cultivation activity of WTI and Brent crude, one after other.
Most valuable data for traders could be generated by glancing at Brent crude reports and supervising the spreading among Brent crude and WTI. Variation in supplies and requirements of any oil can result from a change in the spread; this data proves to be precious as it enables you to deal with those variations proportionately.
|Extracting Location||North Sea||North America|
|Geopolitical Scenarios||More sensitive||Comparatively less sensitive|
|Benchmark and Prices||More premium than WTI||Trades comparatively cheaper|
|Content and composition||0.37% SulpSulphur API||0.24% SulpSulphur.60 API|
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