What is the difference between Brent and West Texas Intermediate?
Nowadays, crude oil futures investment is becoming more and more popular. Investors who want to invest in crude oil futures may ask why Brent crude oil and West Texas Intermediate crude oil are hot among so many kinds of crude oil futures on the market? What is the difference between the two crude oils? Next, let's take a closer look:
The main difference between Brent crude oil and West Texas Intermediate crude oil is that Brent crude oil comes from North Sea oil field between Shetland Islands and Norway, while West Texas Intermediate crude oil comes from American oil field, mainly distributed in Texas, Louisiana and North Dakota. Both Brent crude oil and West Texas Intermediate crude oil are light and low sulfur crude oil, which makes them ideal raw materials for gasoline refining.
Brent crude oil price
Brent crude oil is more common. Most oil prices are based on Brent crude oil, accounting for almost two-thirds of all oil prices. Brent crude is produced offshore, so transportation costs are significantly reduced. In contrast, West Texas Intermediate crude is produced inland, which makes transportation costs more onerous.
The surge in West Texas Intermediate crude oil production has led many traders to believe that West Texas Intermediate crude oil is an important pricing benchmark compared with Brent crude oil, even far from the total output of the latter.
The organization of Petroleum Exporting Countries (OPEC), which controls most of the production and distribution of Brent crude oil, usually regulates not only the costs of oil suppliers, but also those of countries. Most countries budget oil prices, so OPEC has been seen as an important geopolitical force.
West Texas Intermediate crude oil
In the pricing model of West Texas crude oil, the first is Texan. It's not as sweet as Brent. The price of WTI is slightly lower than that of Brent. As of May 25, 2019, the price of West Texas Intermediate crude oil is US $58.63 per barrel, and the price of Brent crude oil is US $67.47 per barrel. Although offshore oil drilling platforms often appear in the news, as a barometer of the health of the domestic oil market, their trading volume is large.
Brent and West Texas Intermediate dominate the oil market and determine their prices in their respective markets.
OPEC, which is made up of 14 of the most powerful oil exporters, uses Brent crude as its pricing benchmark. They are seen as a very strong group because oil prices determine the budgets and policies of many countries.
The shale gas revolution at the beginning of the 21st century led to a surge in North American production, resulting in oversupply and associated low prices during that period.
Due to the progress of oil drilling and hydraulic fracturing technology, the price of West Texas Intermediate crude oil has been lower than that of Brent crude oil, which is a trend. Before that, Brent crude was often cheaper than West Texas crude. This is known as the shale gas revolution in the United States, and from the summer of 2014 to the spring of 2015, the increase in production led to oil prices falling from more than $100 to less than $50.
Oil price is an important factor in the overall health of the energy industry and one of the most traded commodities, as it is affected by almost all the macro events in the world.
Another factor that may lead to significant differences between Brent and West Texas Intermediate is geopolitical issues. During the crisis, the price gap will gradually disappear as political uncertainty leads to a surge in Brent crude oil prices. West Texas Intermediate is less affected because it is located in the interior of the United States.