Crude Oil: Learn about Brent and WTI
Brief: This article will help you understand the difference between Brent and WTI crude oil, and you will also learn ways to trade in Crude Oil. So let’s start.
There are several varieties of Crude oil in the world; the main difference comes from the area where they are extracted.
Some crudes are heavy, which are difficult to refine, and others are easy to convert to gasoline. Also, the place where it is extracted determines the ease of transportation.
If the crude is extracted from the sea, it is easy to transport. So if you were an oil refiner, how would you have valued Crude oil? With so many varieties, it is difficult, right?
So, for this reason, Crude benchmarks are created. The two important benchmarks are Brent Crude and WTI.
When refiners are purchasing Brent or WTI crude, they are aware of the quality and location of the crude oil.
Brent Crude and WTI are both light and sweet (Crude with low sulphur), which is perfect for refining them into gasoline.
The difference is from where they are sourced. Brent crude is sourced from oil fields in the North Sea, mainly between the Shetland Islands and Norway.
At the same time, WTI crude is sourced from oil fields in the US.
Difference between Brent Crude and WTI in detail
OPEC is a group of 13 most powerful oil-exporting countries, and they use Brent as their pricing benchmark.
Approximately two-thirds of all crude contracts that are running in the world currently are priced using Brent as the benchmark.
At the start of the Ukraine-Russia war, the Brent Crude price reached a high of $121.89 as OPEC nations agreed to stick to modest output.
And not get affected by the war and increase supply as Russia was facing sanctions by the USA.
The Organization of Petroleum Exporting Countries (OPEC) controls most of the world’s Crude Oil Production and distribution.
Crude oil price is a determining factor of a country’s financial budget, and as OPEC can control the Crude oil production and distribution, they have control over the budget of most of the countries in the world.
West Texas Intermediate(WTI)
WTI refers to oil that is extracted from wells in the USA. After extraction, the crude oil is sent to Oklahoma via pipelines.
WTI Crude oil wells are covered in land-locked areas, so it gets expensive to ship the crude to certain parts of the world.
For this reason, though the WTI crude is light and sweeter, it is traded at a slightly lower rate than Brent crude oil.
WTI crude oil is the main benchmark for the US Crude oil market.
Trading of Crude Oil
Crude Oil is traded as a commodity on the Commodity exchange. If you want to invest in Crude oil, you can trade through the crude oil derivatives in the commodity exchange.
There are Futures and Options of Crude Oil that are traded on the MCX exchange.
You just need to ask your broker to enable your trading platform to commodity, and then you can start trading on Crude Futures and Options.
The current geo-political scenario has made crude oil prices extremely volatile. Russia is the dominant crude oil exporter.
But currently, several sanctions are imposed on them due to the unprovoked attack on Ukraine. The sanctions are affecting the global Crude oil supply.
If you want to start crude oil trading now, you better be careful and do thorough research.