Oil is considered among the topmost frequently traded commodities across the globe, and for a beneficial reason.
Oil has the ability to collapse the economies as well, 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, which is where precise trading decisions can be made.
WTI vs 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. Basically, 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 crude Oils, namely they are 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 important for Traders to understand how it differs for Brent oil and WTI.
To harmonise the economy, the world’s prominent oil-producing countries except the US depend on Brent oil. As a matter of fact, the political structure of these nations was quite capricious, 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). Among which Venezuela, Iraq, Iran, Nigeria, and Saudi Arabia are major representatives. A compelling part of their nation’s income is achieved from Brent Crude itself. The major 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 pressure, 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. If any kind of interruption is experienced to either WTI crude or Brent crude, then it can cause the spreading change to Brent-WTI, and it gives 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 US, the value of WTI reduced. However, It is now traded at an economical cost compared to Brent.
Currently, in the US, WTI is the benchmark for oil rates, whereas Brent is the global Benchmark across the world 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 upon your country of residence, we have a number of different places where you can 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 further agreements of WTI. Cushing is facilitated with a transmitting point. Also bisecting conduits and storehouse which has 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 CT (Chicago Time) accompanied by a sixty-minute respite each day commencing at 1600hrs CT.
Brent Futures Trading Hours:
Sunday-Friday from 1900hrs to 1700hrs CT the other day.
5. Brent and WTI: Content and Composition
Sulphur content and API gravity of Brent and WTI are very different, which is directly proportional to the price of the oils.
While the content of Sulphur in WTI is 0.24%, the Amount of sulphur in Brent is 0.37%. The Lower Sulphur content of oil proves to be more candied and is uncomplicated to refine. Both Brent and WTI are pleasant crude.
On a scale of 10 to 70, gravity of oil is rated, and according to the scale, the higher the number, the less dense the oil is. 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. 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 variation of the supplies and requirements cycle. For instance, as per the IMO 2020 act, the demand for light and pleasant crude may increase, and therefore 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 common spreading interval between each other. Sometimes, when the limitations of supplies and requirements will apparently move either petroleum longer with respect to 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 effective data for traders could be generated by glancing at Brent crude reports and by supervising the spreading among Brent crude and WTI. Variation in supplies and requirements of any oil can be the result of 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% Sulphur, 38 API||0.24% Sulphur, 39.60 API|