West Texas Intermediate
Encyclopedia
Light crude oil
Light crude oil is liquid petroleum that has a low density and flows freely at room temperature. It has a low viscosity, low specific gravity and high API gravity due to the presence of a high proportion of light hydrocarbon fractions. It generally has a low wax content...
(low density) and sweet
Sweet crude oil
Sweet crude oil is a type of petroleum. Petroleum is considered "sweet" if it contains less than 0.5% sulfur, compared to a higher level of sulfur in sour crude oil. Sweet crude oil contains small amounts of hydrogen sulfide and carbon dioxide. High quality, low sulfur crude oil is commonly used...
(low sulfur) crude oil. It is the underlying
Underlying
In finance, the underlying of a derivative is an asset, basket of assets, index, or even another derivative, such that the cash flows of the derivative depend on the value of this underlying...
commodity
Commodity
In economics, a commodity is the generic term for any marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services....
of Chicago Mercantile Exchange
Chicago Mercantile Exchange
The Chicago Mercantile Exchange is an American financial and commodity derivative exchange based in Chicago. The CME was founded in 1898 as the Chicago Butter and Egg Board. Originally, the exchange was a non-profit organization...
's oil futures contract
Futures contract
In finance, a futures contract is a standardized contract between two parties to exchange a specified asset of standardized quantity and quality for a price agreed today with delivery occurring at a specified future date, the delivery date. The contracts are traded on a futures exchange...
s.
The price of WTI is often referenced in news reports on oil prices, alongside the price of Brent crude
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...
from the North Sea
North Sea
In the southwest, beyond the Straits of Dover, the North Sea becomes the English Channel connecting to the Atlantic Ocean. In the east, it connects to the Baltic Sea via the Skagerrak and Kattegat, narrow straits that separate Denmark from Norway and Sweden respectively...
. Other important oil markers include the Dubai Crude
Dubai Crude
Dubai Crude is a light sour crude oil extracted from Dubai. Dubai Crude is used as a price benchmark or oil marker because it is one of only a few Persian Gulf crude oils available immediately. The other two main oil markers are Brent Crude and West Texas Intermediate.Dubai Crude is generally used...
and the OPEC Reference Basket
OPEC Reference Basket
The OPEC Reference Basket ', also referred to as the OPEC Basket is a weighted average of prices for petroleum blends produced by OPEC countries. It is used as an important benchmark for crude oil prices....
.
Characteristics
WTI is a light crude oilLight crude oil
Light crude oil is liquid petroleum that has a low density and flows freely at room temperature. It has a low viscosity, low specific gravity and high API gravity due to the presence of a high proportion of light hydrocarbon fractions. It generally has a low wax content...
, with an API gravity
API gravity
The American Petroleum Institute gravity, or API gravity, is a measure of how heavy or light a petroleum liquid is compared to water. If its API gravity is greater than 10, it is lighter and floats on water; if less than 10, it is heavier and sinks...
of around 39.6 and specific gravity
Specific gravity
Specific gravity is the ratio of the density of a substance to the density of a reference substance. Apparent specific gravity is the ratio of the weight of a volume of the substance to the weight of an equal volume of the reference substance. The reference substance is nearly always water for...
of about 0.827, which is lighter than Brent crude
Brent Crude
Brent Crude is the biggest of the many major classifications of crude oil consisting of Brent Crude, Brent Sweet Light Crude, Oseberg, Ekofisk, and Forties . Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum...
. It contains about 0.24% sulfur and is thus rated as a sweet crude oil
Sweet crude oil
Sweet crude oil is a type of petroleum. Petroleum is considered "sweet" if it contains less than 0.5% sulfur, compared to a higher level of sulfur in sour crude oil. Sweet crude oil contains small amounts of hydrogen sulfide and carbon dioxide. High quality, low sulfur crude oil is commonly used...
(having less than 0.5% sulfur), sweeter than Brent which has 0.37% sulfur. WTI is refined mostly in the Midwest and Gulf Coast regions in the U.S., since it is high quality fuel and is produced within the country.
Pricing
Historical price data for WTI can be found at a website by the Energy Information Administration of the Department of Energy. It is listed as WTI, Cushing, OklahomaCushing, Oklahoma
Cushing is a city in Payne County, Oklahoma, United States. The population was 8,371 at the 2000 census.The city was established after the Land Run of 1891 by Billy Rae Little. It was named for Marshall Cushing, private secretary to U.S. Postmaster General John Wanamaker...
.
Historically, it has traded closely to Brent and the OPEC basket.
Anomaly in 2007
On May 24, 2007, WTI was priced at $63.58 per barrel as against $71.39 per barrel for Brent (Bloomberg). The anomaly occurred perhaps because of a temporary shortage of refining capacity. On April 13, WTI Crude at Cushing may have temporarily lost its status as a barometer of world oil prices. A large stockpile of oil at the Cushing, Oklahoma storage and pricing facility (mainly due to a refinery shutdown) caused price to be artificially depressed at the Cushing pricing point. As stockpiles decreased, the WTI price increased to exceed the price of Brent once again.Anomaly in 2011
In February 2011, WTI was trading around $85/barrel while Brent was at $103/barrel. The reason that most cite for this anomaly is that Cushing has reached capacity, depressing the oil market in North America which is centered on the WTI price. However, Brent is moving up in reaction to civil unrest in Egypt and across the Middle East. Since stockpiles at Cushing cannot be easily transported to the Gulf Coast for export, WTI crude is unable to be arbitrageArbitrage
In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices...
d in bringing the two back into parity.
See also
- Iranian oil bourseIranian oil bourseThe Iranian Oil Bourse International Oil Bourse, Iran Petroleum Exchange Kish Exchange or Oil Bourse in Kish is a commodity exchange which opened on February 17, 2008. It was created by cooperation between Iranian ministries, the Iran Mercantile Exchange and other state and private institutions...
- Petrobourse
- Petrodollar warfarePetrodollar warfareThe phrase petrodollar warfare refers to a hypothesis that one of the unknown, driving forces of United States foreign policy over recent decades has been the status of the United States dollar as the world's dominant reserve currency and as the currency in which oil is priced. The term was coined...
- Petroeuro
- Petroleum classification
External links
- U.S. Energy Information Administration Part of the U.S. Department of Energy, official source of price and other statistical information