What is WTI light crude oil futures and what is the difference between Brent crude oil and WTI light crude oil futures
Nymexwti light crude oil futures (code CL) is the most liquid and active crude oil futures contract in the world, and is the most effective way of trading in the global oil market.
Nymexwti trades nearly 1.2 million contracts a day, each futures contract is equal to 1000 barrels and worth about $44740. *The contract was traded in increments of one cent a barrel.
WTI is a light, sweet crude oil mixture. "Light" refers to its low density and sulfur content, which is very suitable for conversion into gasoline and diesel fuel. It contains a small amount of hydrogen sulfide and carbon dioxide. High quality, low sulfur crude oil is usually used for processing into gasoline and is in great demand, especially in industrialized countries. Light and low sulfur crude is the most popular version of crude oil because it contains a disproportionate portion of the crude oil, which is directly processed (fractionated) into gasoline (naphtha), kerosene and high-quality diesel (gas oil). The word sweet comes from the fact that low sulfur content gives oil a mild sweet and pleasant smell. Explorers in the 19th century would taste and smell a small amount of oil to determine its quality.
Light crude oil futures trading can be traced back to the 1970s. Compared with the more mature commodity market, the energy market is relatively new. The birth of light crude oil futures is mainly to control the internal volatility of commodity market and risk management. In addition, light crude oil futures trading is more like apple to apple, its predecessor exists in the commodity market, they all rely on supply and demand.
The main advantages of trading WTI light crude oil futures are that nearly 1.2 million contracts are traded daily, with a position of 2 million +. WTI is the preferred measure of world oil prices due to rising US production, Asian use and US export ban. Futures leverage: control the value of large contracts with a small amount of funds. If used properly, it is an effective way to improve capital efficiency and exposure.
What factors affect WTI light crude oil futures?
Weekly EIA report (Wednesday) - tracks U.S. crude oil inventory levels for future use
API weekly (Tuesday) - tracks U.S. and regional total inventory and refinery operations data
During the meeting of the organization of Petroleum Exporting Countries (OPEC), the oil market listened to the meeting of 14 major OPEC exporting countries
Refinery capacity report - track usage and capacity of available refineries
GDP report - tracks the health of the U.S. economy and, in turn, consumer demand for gasoline
Gas inventory report – cheaper natural gas impacts oil demand as a viable energy alternative
Weather events - may affect major production sites and pipelines
World events - war, financial crisis, elections, etc. may affect oil policy and oil costs
Changes in import and export policies – can greatly affect world oil supply and, in turn, affect prices
Contract standard details
|Contract size||1000 barrels|
|Minimum scale||$0.01 per barrel|
|The dollar value of a barrel||10 dollars|
|Product contract code||CL|
|Trading hours||U.S. time: Sunday – Friday 5:00 p.m. - 4:00 p.m. CT, 60 minutes rest every day at 4:00 p.m|
|Trading place||CME provides nearly 24 hours a week / 6 days a week for electronic transactions|
|Available options||Quarterly, monthly, weekly|
The difference between Brent crude oil and WTI crude oil
One of the main differences is the type of oil and the different benchmarks for crude oil prices around the world. Many may not realize that Texas's oil from the ground is different from the oil from the North Atlantic. According to various indicators (such as API gravity of oil), there are different degrees of oil. The American Petroleum Institute's gravity is a statistic used to compare the density of petroleum liquids with that of water. This ratio is usually between 10 and 70, "light" crude usually has an API at the higher end of the scale, while heavy oil readings are at the lower end of the range.
In addition to the gravity of API, investors need to consider the sweetness or acidity of oil. This is based on the sulfur content of the base fuel, with 0.5% as the key benchmark. When the total sulfur content of oil is greater than 0%, it is considered as "acid", while the content below 0.5% indicates that the oil is "sweet". Sour oil is more common than its desserts and comes from the oil sands of Canada, the Gulf of Mexico, some South American countries and most of the Middle East. On the other hand, sweet crude oil is usually produced in the central United States, the North Sea in Europe, most of Africa and the Asia Pacific region. Although both types are useful, end users generally prefer sweet crude oil because it requires less processing to remove impurities than its sour counterparts. The price of light and sweet crude oil is highly valued, while heavy fuel is often traded at a lower level than its cousins in demand.
With these two key factors, investors can begin to price these different types of oil in the world market. At present, the world oil price has two main benchmarks, West Texas Intermediate oil (WTI) and Brent crude oil. Both are light sweet crude oil, although WTI is generally sweeter and lighter than its European counterparts. As a result, WTI is often traded at a premium, usually for a few dollars a barrel. However, due to the Libya crisis, the supply of light and sweet crude oil in Europe decreased, and the supply of main storage facilities of WTI in Oklahoma was oversupplied, and the premium / discount situation deteriorated. At present, the price of Brent crude oil in the market is relatively higher than that of WTI.