West Texas Intermediate (WTI): What Is It?

Together with Brent and Dubai Crude, West Texas Intermediate (WTI) crude oil is one of the three primary benchmarks in oil pricing. Because WTI has a low density (specific gravity) and a sulfur content of between 0.24% and 0.34%, it is referred to as a light, sweet oil.

“WTI.” Energy Insights.

The basis of the oil futures contract on the New York Mercantile Exchange (NYMEX) is WTI, which is regarded as a premium oil with effortless refinement.

Due to its American origins, particularly in the Permian Basin, West Texas Intermediate (WTI) is the primary oil benchmark for North America. Texas is the primary source of the oil. After that, oil passes via pipelines to the Midwest and the Gulf of Mexico for refinement. Cushing, Oklahoma, is the primary delivery point for WTI’s physical exchange and price settlement.

The Cushing Hub delivery system comprises 16 storage terminals and 35 pipelines (20 incoming and 15 outgoing). The hub has a storage capacity of 90 million barrels, making up 13% of the nation’s oil storage. The daily capacity for both incoming and outgoing barrels is 6.5 million. Cushing has earned the moniker “The Pipeline Crossroads of the World.”

West Texas Intermediate as a Reference for the Oil Market

In the oil market, benchmarks are essential because they provide buyers and sellers of crude oil with a reference price. The price of oil is often stated in the media using benchmarks for the oil industry. Despite being the most widely used benchmarks, Brent and WTI oil prices are often compared. “Brent-WTI spread” refers to the price differential between WTI and Brent.

Two-thirds of oil contracts worldwide utilize Brent as a benchmark, making Brent the most widely used internationally. WTI does not have this distinction. However, they are both regarded as premium oils and the world’s two most significant oil benchmarks. As previously indicated, the sulfur content of WTI is between 0.24% and 0.34%, whereas Brent’s is between 0.35% and 0.40%. An oil’s ease of refinement and increased appeal directly correlate with its decreased sulfur level. A sulfur concentration of less than 0.5% is regarded as sweet. While Brent is better for diesel, WTI is better for gasoline.

Given the quality, WTI oil should ideally sell for more than Brent oil, but this is only sometimes true. Although the two types of crude oil have the potential to trade at comparable prices, each has a distinct supply-and-demand market. Therefore, the price of each crude oil reflects the market’s specifics.

The price of WTI has decreased, and it often trades below Brent since the U.S. shale boom increased commodity output. Moreover, the expense of shipping WTI outside to the market for Brent petroleum may be so high that WTI could not compete on price with Brent crude.

Conclusion

• The light, sweet crude oil known as West Texas Intermediate (WTI) is one of the primary international oil benchmarks.
• It comes mainly from inland Texas and is easily refined, making it one of the best oils in the world.
• The underlying asset for the oil futures contract on the NYMEX is WTI.
• WTI often contrasts with Brent crude, the benchmark oil price used in two-thirds of global oil contracts based on North Sea oil extraction.